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					Graça Morais
Sem título

(Detail)
                        Notes to the Consolidated Financial Statements




                          Graça Morais
                              Sem título
                                  1993

Handmade, handpainted biscuit-fired tiles

                    Panel 308 x 810 cm
                   Tile 14 x 14 x 0,8 cm

              Design: Ratton Cerâmicas
Manufacture: Fábrica Sant’Anna - Lisboa
                      Application: 1993
      Notes to the Consolidated                                                                     the financial statements used for the preparation of the
      Financial Statements                                                                          consolidated accounts will be approved without significant
      as at 31 December 2005 and 2004                                                               changes.


      (Translation of notes originally issued in Portuguese - Note 44.)                             2. Accounting Policies
      (Amounts expressed in thousands of euros – € thousand,
      unless otherwise specified)                                                                   2.1. Presentation Bases
                                                                                                    The consolidated financial statements as at 31 December
      1. Introductory Notes                                                                         2005 have been prepared in accordance with the
                                                                                                    International Financial Reporting Standards (IFRS), as
      Caixa Geral de Depósitos, SA (hereinafter referred to as                                      adopted in the European Union, under European Council
      Caixa or CGD), founded in 1876, is an exclusively State                                       and Parliament Regulation (CE) no.1606/2002 of 19 July
      owned company. Caixa became a State owned company                                             and the provisions of Decree Law 35/2005 of 17 February.
      on 1 September 1993 pursuant to the terms of Decree Law
      no. 287/93, of 20 August, which also approved its articles                                    The consolidated financial statements for 2005 are the first
      of association.              On 23 July 2001 Banco Nacional                                   to have been prepared by the CGD Group in accordance
      Ultramarino, SA (BNU) was merged into Caixa.                                                  with IFRS. Therefore, as defined in “IFRS 1 - First Time
                                                                                                    Adoption of International Financial Reporting Standards”
      CGD operates as a universal bank. At 31 December 2005                                         (IFRS 1), the standards and interpretations in force as at
      Caixa had a national network of 770 branch offices, a                                         31 December 2005 were used. The consolidated financial
      branch in France with 45 branch offices, a branch in Timor                                    statements up to 31 December 2004 were prepared in
      with 8 branch offices, branches in London, Luxembourg,                                        accordance with the principles set out in the Chart of Accounts
      Monaco, New York, the Cayman Islands and Zhuhai, an                                           for the Banking System, under the terms of Bank of Portugal
      Offshore and an International Financial Branch in Madeira.                                    Instruction no. 4/96 of 17 June and other rules issued by the
                                                                                                    said entity, in addition to Decree Law 36/92 of 26 March. Note
      Caixa also has direct and indirect investments in a                                           43. sets out information on the impact of the adoption of
      significant number of domestic and foreign companies in                                       IFRS on the consolidated financial statements, at the
      Spain, Cape Verde, Mozambique, South Africa, Brazil and                                       transition date.
      Macao, in which it is the major shareholder. These
      companies comprise the Caixa Geral de Depósitos Group                                         In accordance with IFRS 1 the financial statements as at
      (the “Group”). They operate in various financial sub sectors                                  31 December 2004 and for the year then ended, presented
      such      as     banking,         insurance,         investment           banking,            for   comparison    purposes     (i.e.   pro-forma   financial
      brokerage, venture capital, property, asset management,                                       statements), were prepared and restated using the
      specialised credit, e-commerce and cultural activities. Caixa                                 standards in force at 31 December 2005. As permitted
      also has investments in non-financial companies in the                                        under IFRS 1, CGD did not apply the standards on financial
      Portuguese economy.                                                                           instruments (IAS 32 – “Financial instruments – Disclosure
                                                                                                    and Presentation” and IAS 39 – “Financial Instruments –
      On 24 April 2006, the Board of Directors approved the                                         Recognition and Measurement”) and insurance contracts
      consolidated financial statements as at 31 December 2005.                                     (IFRS 4 – “Insurance Contracts”) in preparing the
                                                                                                    comparative information.
      The financial statements of CGD and some of its
      subsidiaries and associated companies as at 31 December                                       Accordingly, as regards matters regulated by the above
      2005 are still subject to approval by the respective statutory                                mentioned IFRS, the measurement and recognition
      bodies. CGD’s Board of Directors, however, expects that                                       principles established in the Chart of Accounts for the




      Notes to the Consolidated Financial Statements | Introductory Notes and Accounting Policies
144
Banking Sector and Chart of Accounts for the Insurance                and capital gains and losses on transactions between
Sector, in force for preparing the consolidated financial             Group companies.
statements for 2004, were used (see Notes 2.6. e) and
2.16). However, the balances of financial instruments and             At 31 December 2005 and 2004 CGD had participating
insurance     contracts    were,      whenever     possible    and    securities representing approximately 52% of the capital of
applicable, classified in the balance sheet and income                INH-Instituto Nacional de Habitação (National Housing
statement headings in conformity with IAS 32, IAS 39 and              Institute). This investment has not been consolidated owing
IFRS 4, to facilitate comparison with the corresponding               to the fact that the participating securities do not entitle
balances for the current period.                                      CGD to participate in INH’s management.


2.2. Consolidation Principles                                         As explained in Note 3., in July 2004 Caixa Seguros, SGPS, SA
The consolidated financial statements include the accounts            entered into an agreement to purchase all the share capital
of CGD and the entities controlled directly and indirectly by         of Império Bonança, SGPS, SA. As ownership of the shares
the Group (Note 3.), including special purpose entities.              and control over the management of the entity and the
                                                                      indirectly acquired insurance companies were only
Subsidiary companies are those in which the Group has                 transferred in January 2005, these companies were not
effective control over their current management with the              included in the consolidation at 31 December 2004.
aim of obtaining economic benefits from their operations.
Control is normally considered to exist where more than               Companies under the joint control of Caixa and other
50% of the share capital or voting rights are held. In                entities, namely Esegur – Empresa de Segurança, SA, are
addition, and as a result of applying IAS 27 –                        consolidated by the proportional consolidation method,
“Consolidated and separate financial statements”, the                 under which their assets, liabilities, costs and income were
Group included special purpose entities in its consolidation          incorporated into the consolidated accounts in proportion
perimeter,    i.e.    vehicles    and   funds    created      under   to CGD’s respective participating interest in them.
securitisation operations, venture capital and investment
funds and other similar entities over which it exercises              2.3. Business Combinations and
financial and operating control and/or where the Group                Goodwill
has the majority of the risks and benefits relating to their          Acquisitions of subsidiaries are recorded by the purchase
operations.                                                           method. The cost of acquisition comprises the sum of the
                                                                      fair value of assets given and liabilities incurred or assumed
CGD’s subsidiaries were consolidated by the full                      in exchange for obtaining control over the entity acquired
consolidation        method.     Significant   transactions    and    plus the costs directly attributable to the operation. On the
balances between the consolidated companies were                      date of acquisition, which is the date on which the Group
eliminated. In addition, whenever applicable, consolidation           obtains control over the subsidiary, identifiable assets,
adjustments were made to ensure the consistency with the              liabilities and contingent liabilities that meet the
Group’s accounting principles.                                        recognition     requirements           of     IFRS      3     –    “Business
                                                                      combinations” are recognised at their respective fair value.
Third party participation in such companies is recognised in
the equity heading "Minority interest".                               Goodwill corresponds to the positive difference between
                                                                      the cost of a subsidiary and the effective participating
Consolidated net income is the result of aggregating the              interest on the fair value of the identifiable assets, liabilities
net results of CGD and its subsidiaries in proportion to the          and contingent liabilities acquired by the Group, on the
effective participation in them, after consolidation                  acquisition date. Goodwill is recognised as an asset and is
adjustments, namely the elimination of dividends received             not amortised.




                                                                                    Notes to the Consolidated Financial Statements | Accounting Policies   145
      If after revaluation of the Group, the part corresponding to           share of assets, liabilities and contingent liabilities acquired
      its participating interest in the acquired entity’s identifiable       by the Group, is included in the carrying amount of the
      assets, liabilities and contingent liabilities exceeds the cost        investment, which is annually tested for impairment.
      of acquisition, the excess is immediately recorded as income
      in the income statement for the year.                                  Unrealised gains or losses on transactions with associates
                                                                             are eliminated to the extent of the Group’s effective
      At least once per year the Group performs impairment tests             participating interest in the associates.
      of recorded goodwill, in accordance with the requirements of
      IAS 36 – “Impairment of assets”. For this purpose, goodwill is         2.5. Translation of Balances and
      allocated to cash flow generating units and its recoverable            Transactions in Foreign Currency
      value is determined on the basis of estimated future cash              The non-consolidated accounts of the Group entities
      flows, discounted at rates considered appropriate by the               included in the consolidation are prepared in their
      Group. Impairment losses on goodwill are recognised in the             functional currencies. In the consolidated accounts the
      income statement for the year and cannot be reversed.                  results and financial position of each entity are expressed
                                                                             in the Group’s functional currency, which is the Euro.
      Up to 1 January 2004, as permitted by the Bank of Portugal,
      goodwill was deducted in full from equity in the year of the           Foreign currency transactions are recognised in the non-
      acquisition of the subsidiaries. As permitted by IFRS 1, the           consolidated financial statements of Caixa and its
      Group did not change this procedure and, consequently,                 subsidiaries based on the reference foreign exchange
      goodwill generated on operations up to 1 January 2004                  rates in force on the transaction dates.
      remains recorded in reserves.
                                                                             Foreign currency monetary assets and liabilities at each
      2.4. Investments in Associates                                         balance sheet date are translated to each entity’s
      Associates are those companies over which the Group has                functional currency using the closing exchange rate.
      significant influence, but does not have effective control             Non-monetary assets carried at fair value are translated
      over their management. Significant influence is presumed               based on the exchange rates in force on the last
      to exist whenever the Group has a direct or indirect                   measurement date. Non-monetary assets carried at cost,
      participation of between 20% and 50% in their share                    including tangible and intangible assets, continue to be
      capital or of voting rights.                                           recognised at their original exchange rates.


      Investments in associates are accounted for using the                  Exchange     differences     arising   on    translation    are
      equity method of accounting. In accordance with this                   recognised in the income statement for the year, except
      method, investments are initially recognised at cost which             for those arising on non-monetary financial instruments
      is subsequently adjusted for the Group’s share in the                  measured at fair value, such as shares classified as
      changes on the equity of associates (including profit or               available-for-sale financial assets, which are recognised in
      loss).                                                                 a separate equity heading until they are sold.


      If there are significant differences in relation to the Group’s        The Group uses derivatives, such as forwards and
      accounting principles, adjustments are made to the                     currency swaps, to reduce exposure to exchange risk.
      associates’ equity, used for applying the equity method, to            The accounting policies used to record such operations
      reflect the Group’s accounting principles.                             are described in Note 2.6. c) below.


      Goodwill, corresponding to the positive difference between             In the consolidated accounts, the assets and liabilities of
      the acquisition cost of an associate and the fair value of the         entities which do not use the Euro as their functional




      Notes to the Consolidated Financial Statements | Accounting Policies
146
currency are translated at the closing exchange rates, whereas   ii) Held-to-maturity investments
income and expenses items are translated at the average rates    Fixed-income, low risk securities which the Group intends
for the period. Under this method the translation differences    and is able to hold to maturity are classified in this category.
are recognised in the equity heading “Currency translation
reserve”, being recognised in profit or loss upon the disposal   These financial assets are measured at amortised cost. In
of the subsidiary. As permitted by IFRS 1, the Group opted not   accordance with this method, the carrying amount of the
to recalculate and recognise in the “Currency translation        financial instruments at each balance sheet date
reserve" the cumulative translation differences for financial    corresponds to their initial cost less repayments of principal
statements of subsidiaries expressed in foreign currency up      and impairment losses adjusted by amortisation, based on
to 31 December 2003 and so the balance of this heading           the effective interest method, of any difference between
only reflects translation differences that arose as from         the initial cost and the repayment amount.
1 January 2004.
                                                                 Interest is recognised in accordance with the effective interest
2.6. Financial Instruments                                       method, which enables amortised cost to be calculated and
a) Financial Assets                                              interest to be allocated over the period of the operation. The
Financial assets are recognised at fair value at the trade       effective interest rate is the rate that exactly discounts
date. In the case of financial assets measured at fair           estimated future cash flows relating to the financial instrument,
value through profit or loss, costs directly attributable to     to its net carrying amount on the date of its initial recognition.
the transactions are recognised in the heading “Cost of
services and commissions”. In the remaining cases, such          This heading as at 31 December 2005 consisted entirely of
costs are included in the book value of the asset. Upon          securities held by Banco Simeón.
initial recognition, these assets are classified in one of
the following IAS 39 categories:                                 iii) Loans and receivables
                                                                 These are financial assets with fixed or determinable
i) Financial assets at fair value through profit or              payments that are not quoted in an active market and not
   loss                                                          included in any of the other financial asset categories
This category includes:                                          already mentioned. This category includes loans and
- Financial assets held for trading, which comprise              advances to Group customers, amounts receivable from
 essentially securities acquired for the purpose of              other credit institutions and amounts receivable for services
 realising   gains    from    short   term    market    price    rendered or sales of assets, recognised in “Other assets”.
 fluctuations. This category also includes derivatives,
 excluding those that comply with the requirements for           These assets are initially recognised at fair value, less any
 hedge accounting; and,                                          charges included in the effective interest rate, plus all
- Financial assets irrevocably designated as at fair value       incremental costs directly attributable to the transaction.
 through profit or loss upon initial recognition, as             The assets are subsequently measured in the balance sheet
 permitted by IAS 39.                                            at amortised cost, less impairment losses. Interest is
                                                                 recognised based on the effective interest method.
Financial assets classified in this category are measured
at fair value, with gains and losses arising from                iv) Available-for-sale financial assets
subsequent changes in fair value being recorded in the           This category includes financial instruments designated as
income statement heading “Results from financial                 available-for-sale upon initial recognition and cannot be
operations”. Interest is recognised in the appropriate           classified in any other IAS 39 category. This category includes:
“Interest and similar income” heading.                           - Equity securities not classified as financial assets at fair
                                                                  value through profit or loss, including stable equity




                                                                               Notes to the Consolidated Financial Statements | Accounting Policies   147
        investments (previously classified as “Investments”).                - Valuation methods and techniques used to determine the
        Therefore it also includes equity instruments held under              fair value of debt instruments not traded on active
        the Group’s venture capital operations;                               markets (including unlisted securities or securities with
      - Bonds and other debt instruments classified under this                low liquidity), include:
        heading upon initial recognition;
      - Participating units in investment funds.                                i) Bid prices published by financial information services
                                                                                  such as Bloomberg and Reuters, including market
      Available-for-sale financial assets are measured at fair value,             prices available on recent transactions;
      except for equity instruments not listed on an active market
      whose fair value cannot be reliably measured, which                       ii) Reference bid prices obtained from financial
      continue to be recorded at cost. Gains and losses arising                   institutions operating as market-makers;
      from changes in fair value are recognised directly in the
      equity heading “Fair value reserves”. At the time of sale or              iii) Internal valuation models that incorporate market
      if impairment is determined, the cumulative gains or losses                  data that would be used in setting the price of the
      are transferred to profit or loss for the year and recognised                financial instrument, reflecting market interest rates
      in the headings “Results from financial operations” or                       and volatility, as well as the liquidity and credit risk
      “Other asset impairment, net of reversals and recovery”,                     of the instrument.
      respectively.
                                                                             - Unlisted equity instruments relating to venture capital
      Interest on debt instruments classified in this category is             operations are valued on the following basis:
      calculated using the effective interest method and is recorded
      in the income statement heading “Interest and similar                     i) Prices   of    significant   transactions     between
      income”.                                                                    independent entities over the last six months;


      Dividends on equity instruments classified in this category are           ii) Multiples of comparable companies in terms of
      recorded as income in the "Income from equity instruments”                   business sector, size and profitability;
      heading, when the Group’s right to receive them has been
      established.                                                              iii) Discounted cash flows, using discount rates
                                                                                   appropriate to the risk of assets held.
      Fair value
      As mentioned above, financial assets recorded as at fair                  The calculation of fair value incorporates discount
      value through profit or loss and available-for-sale financial             factors to reflect the securities’ lack of liquidity. In
      assets are measured at fair value.                                        addition, if there is a right or contractual obligation to
                                                                                sell an asset, it will be valued at an amount between
      Fair value corresponds to the amount for which a financial                that resulting from the above mentioned valuation
      asset can be sold or a financial liability settled between                methods and the present value of the selling price of
      independent, knowledgeable, willing parties in an arm’s                   the asset, adjusted where applicable to reflect
      length transaction.                                                       counterparty credit risk.


      The fair value of financial assets is determined by a                  - Other unlisted equity instruments whose fair value cannot
      Department of Caixa which is independent of the trading                 be reliably measured (e.g. no recent transactions) are
      function, based on:                                                     measured at cost, less any impairment losses.
      - The closing price at the balance sheet date, for
        instruments traded on active markets;




      Notes to the Consolidated Financial Statements | Accounting Policies
148
b) Financial Liabilities                                           - The economic characteristics and risks of the embedded
Financial liabilities are recognised on their trade date, at        derivative are not closely related to the economic
their fair value less the costs directly attributable to the        characteristics and risks of the host contract as defined in
transaction.        Financial liabilities are classified in the     IAS 39; and
following categories:                                              - The hybrid (combined) financial instrument is not
                                                                    measured at fair value, with the changes in fair value
i) Financial liabilities at fair value through profit or loss       recognised in profit or loss.
These comprise derivative financial instruments with
negative fair value, which are measured at fair value.             The main impact of this procedure as regards the Group’s
                                                                   operations, consists of the need to separate and measure
ii) Other financial liabilities                                    at fair value the derivatives embedded in deposits and debt
This category includes resources of central banks and other        securities, namely those whose return/remuneration does
credit institutions, customer resources, debt securities,          not comprise interest (such as returns/remuneration
subordinated liabilities and liabilities incurred for services     indexed to share indices or prices, exchange rates, etc.). At
received or the purchase of assets, recognised in “Other           the time of separation, the derivative is recognised at its
liabilities”.                                                      fair value, the initial amount of the host contract
                                                                   corresponding to the difference between the total value of
These financial liabilities are valued at amortised cost,          the combined instrument and the initial fair value of the
interest, where applicable, being recognised in accordance         derivative. Therefore, no profit or loss is recognised upon
with the effective interest method.                                the initial recognition of the operation.


c) Derivatives and Hedge Accounting                                Hedging derivatives
The Group carries out derivative transactions as part of its       These derivatives are contracted to hedge the Group’s
activity, so as to provide for its customers’ requirements         exposure to specific risks of its operations.                              The
and reduce its exposure to foreign exchange, interest rate         classification as a hedging derivative and the use of hedge
and price fluctuations.                                            accounting, as explained below, are subject to compliance
                                                                   with the IAS 39 rules.
Derivatives are recognised at fair value at the trade date.
Their respective notional values are also reflected in off-        At 31 December 2005 the Group only used hedges to the
balance sheet accounts.                                            exposure to changes in fair value of recognised assets or
                                                                   liabilities, called “fair value hedges”.
Derivatives are subsequently measured at their respective
fair values, determined as follows:                                At the inception of a hedge relationship the Group
- Based on prices obtained from active markets (e.g.               prepares formal documentation that includes the following
  futures traded on organised markets);                            minimum aspects:
- Based on models incorporating valuation techniques               - Risk management objective and strategy for undertaking
  accepted in the market, including discounted cash flows           the hedge, in accordance with defined hedging policies;
  and option valuation models.                                     - Description of the hedged risk(s);
                                                                   - Identification and description of the hedged and hedging
Embedded derivatives                                                financial instruments;
Financial       derivatives   embedded    in   other   financial   - Method for assessing the hedge’s effectiveness and
instruments are separated from the host contracts and               frequency of that assessment.
accounted for separately as derivatives under IAS 39,
whenever:




                                                                                Notes to the Consolidated Financial Statements | Accounting Policies   149
      Assessments of hedge effectiveness are performed and                    tests fall outside the range permitted by IAS 39;
      documented monthly, by comparing the changes in fair                   - Derivatives contracted for trading purposes.
      value of the hedging instrument and of the hedged item
      (part attributable to the hedged risk). According to IAS 39,           Trading derivatives are measured at fair value, with daily
      the use of hedge accounting is allowed if actual results of            changes being recorded in profit or loss for the year in the
      the hedge fall within a range of 80% to 125%. Prospective              heading “Results from financial operations”, except for the
      effectiveness tests are also performed to estimate future              part relating to accrued and realised interest cash-flows, which
      effectiveness of the hedge.                                            is recognised in “Interest and similar income” or “Interest and
                                                                             similar costs”. Derivatives with positive and negative fair value
      Hedging derivatives are measured at fair value, with daily             are recorded in the headings “Financial assets at fair value
      changes in fair value being recognised in profit or loss. If           through profit or loss” and “Financial liabilities at fair value
      the hedge is regarded as effective, through the                        through profit or loss”, respectively.
      determination of an effectiveness rate of between 80%
      and 125%, Caixa also records in profit or loss the change              d) Impairment of Financial Assets
      in the fair value of the hedged item attributable to the               Financial assets at amortised cost
      hedged risk, in the income statement heading “Results                  The Group periodically performs impairment tests on its
      from financial operations”. In the case of instruments with            financial assets measured at amortised cost, namely loans
      an interest component (such as interest rate swaps),                   and advances to credit institutions, held-to-maturity
      accrued interest for the period and realized cash flows are            investments and loans and advances to customers.
      recognised in the net interest income headings “Interest
      and similar income” and “Interest and similar costs".                  Evidence of impairment is assessed individually in the case
                                                                             of financial assets having significant exposure amounts and
      If the hedging relationship ceases to be effective, the                collectively in the case of homogenous assets which are not
      cumulative change in fair value reflected in the hedged                individually significant.
      item is recognised in profit or loss up to its maturity.
                                                                             In accordance with IAS 39, the following events are
      Hedging derivatives with positive and negative fair values             considered to be signs of impairment of financial assets
      are recognised in specific asset and liability headings,               recorded at amortised cost:
      respectively.                                                          - Failure to comply with contractual clauses, such as arrears
                                                                              of interest and principal;
      Changes in fair value of hedged items are recognised in the            - A record of defaults in the financial system;
      balance sheet headings in which such assets and liabilities            - Existence of loan restructuring operations or respective
      are recorded.                                                           negotiations, in progress;
                                                                             - Difficulties in terms of the capacity of the shareholders
      Trading derivatives                                                     and management, notably when major shareholders and
      These include all derivatives that are not effective hedging            key staff leave the company or when the shareholders are
      instruments in accordance with IAS 39, namely:                          in dispute;
      - Derivatives contracted to hedge risks on assets or liabilities       - Significant financial difficulties of the debtor or debt
        measured at fair value through profit or loss, thus rendering         issuing entity;
        hedge accounting unnecessary;                                        - High probability of the debtor or debt issuing entity being
      - Derivatives contracted for hedging purposes that fail to meet         declared bankrupt;
        the requirements for hedge accounting under IAS 39, due to           - Decrease of the debtor’s competitive position;
        difficulty in specifically identifying the hedged items, cases       - Historical record of collections suggesting that the nominal
        other than micro hedges or if the results of the effectiveness        value will not be fully recovered.




      Notes to the Consolidated Financial Statements | Accounting Policies
150
Whenever evidence of impairment on individually analysed           Interest on overdue credit secured by mortgage or other real
assets is identified, the possible impairment loss corresponds     guarantee is not reversed. However, the recognition of
to the difference between the present value of the                 interest on outstanding principal of operations secured by real
estimated future cash flows (i.e. recoverable value),              guarantee and mortgage, with loan instalments overdue for
discounted at the effective original interest rate of the asset,   more than six and twelve months, respectively, is suspended.
and the book value at the time of the analysis.
                                                                   The recovery of interest written off is also recognised in the
Assets not specifically assessed for impairment are included       heading “Loan impairment net of reversals and recovery”.
in homogenous groups with similar risk characteristics (on
the basis of counterpart and credit type) and are collectively     Available-for-sale financial assets
assessed for impairment. Future cash flows were estimated          As mentioned in Note 2.6. a), available-for-sale financial
based on historical information on defaults and recoveries         assets are measured at fair value, with fair value changes
on assets with similar characteristics.                            being recognised directly in the equity heading “Fair value
                                                                   reserve”.
Assets individually assessed on which no objective evidence
of impairment has been identified are also subject to              Whenever there is objective evidence of impairment, the
collective impairment assessments, as described in the             accumulated losses recognised in reserves are transferred to
preceding paragraph.                                               the income statement heading “Other asset impairment net
                                                                   of reversals and recovery”.
Impairment losses calculated on a collective basis include
the time effect of discounting estimated cash flows                In addition to the above mentioned signs of impairment of
receivable on each operation to the balance sheet date.            assets recognised at amortised cost, IAS 39 provides for the
                                                                   following specific signs of impairment of equity instruments:
The impairment loss is recognised in the heading “Loan             - Information regarding significant changes with an adverse
impairment net of reversals and recovery” and is recognised         effect that have taken place in the technological, market,
separately in the balance sheet as a deduction from the             economic or legal environment in which the issuing entity
amount of the respective credit.                                    operates, indicating that the cost of the investment may not
                                                                    be fully recovered;
Write off of principal and interest                                - A prolonged, significant decline in fair value below cost.
The Group periodically writes-off non-recoverable credits
using the respective accumulated impairment after specific         The Group performs impairment tests on available-for-sale
analysis by the bodies responsible for monitoring and              financial assets at each balance sheet date.
recovering loans, and approval of the Boards of Directors of
the various entities. Recoveries of credits written off are        Impairment losses on equity instruments cannot be reversed.
recognised as deductions from impairment losses in the             Any unrealised gains arising after the recognition of
income statement heading “Loan impairment net of reversals         impairment losses are recognised in the “Fair value reserve”.
and recovery”.
                                                                   The Group also performs periodic impairment tests on
In accordance with current Group policy, interest on overdue       financial assets measured at cost, namely unlisted equity
loans without real guarantees is reversed three months after       instruments whose fair value cannot be reliably measured.
the due date of the operation or of the first overdue              The recoverable value in this case corresponds to the best
payment. Interest not recorded on these loans is only              estimate of future flows receivable from the asset, discounted
recognised in the year in which it is received.                    at a rate that reflects the risk of holding the asset.




                                                                                Notes to the Consolidated Financial Statements | Accounting Policies   151
      The amount of the impairment loss determined is recognised             - Investments – This heading included stable investments
      directly in profit or loss for the year. Impairment losses on           in companies not classified as subsidiaries or associates.
      such assets cannot be reversed.                                         Such investments were recorded at cost. Provisions for
                                                                              unrealised losses were recognised based on the following
      e) Accounting Policies Used in Comparative                              criteria:
      Financial Statements                                                      - In accordance with the Bank of Portugal Notice 3/95 of
      As explained in Note 2.1., the Group opted not to reflect the              30 June, the full amount of unrealised losses had to
      standards relating to financial instruments (IAS 32 – “Financial           be provided for if the participated company was in
      Instruments – Disclosure and Presentation” and IAS 39 –                    one of the situations mentioned in the Notice, which
      “Financial Instruments – Recognition and Measurement”) in                  include losses incurred for three consecutive or non-
      the comparative financial information for 2004. Rather, the                consecutive years, over the last five years, insolvency
      measurement and recognition criteria in force for consolidated             or bankruptcy or had stopped operating, etc.;
      accounts for 2004, namely those set out in the Chart of                   - Provisions for investments not covered by Bank of
      Accounts for the Banking System, were used. Following is a                  Portugal Notice 3/95 were determined in accordance
      summary of the areas in which such accounting principles                    with the Bank of Portugal Notice 4/2002 of 25 June.
      differ from IFRS. The impact on equity as at 1 January 2005, of             Under that Notice, unrealised losses were determined
      adopting these standards, is set out in Note 43..                           based on the average daily market prices during the
                                                                                  preceding six months, for investments in companies
      Securities portfolio – banking activity                                     listed on organised markets, and 150% of the book
      Securities were classified as follows, based on their                       value of the participated company’s equity, for
      characteristics and the intention, upon acquisition, to retain              unlisted companies. In accordance with the Notice,
      them:                                                                       whenever the unrealised loss on an investment
                                                                                  exceeds 15% of its book value, a provision of at least
      - Trading securities - Comprise securities bought for the                   40% of that excess had to be recorded. In the case of
        purpose of resale within a period not exceeding six                       investments already held at 31 December 2001, a
        months. These securities were recorded at fair value. Fair                transitory period of between 5 and 10 years was
        value changes were recognised in profit or loss, except                   allowed for the recognition of provisions determined
        for shares not included on indices defined by the Bank of                 in accordance with the Notice, the provisions recorded
        Portugal. Unrealised gains in such cases were deferred in                 up to 2004 having been charged to reserves.
        the heading “Other assets”.
                                                                             Caixa adopted the transitory regime and recorded the
      - Investment securities - This heading includes securities             provisions based on the minimum limits established in the
        usually held for longer than six months, with the                    Notice, except for provisions for equity investments in
        intention of earning a stable income and without the                 Banco Comercial Português, SA and EDP – Energias de
        purpose of exercising influence on the management of                 Portugal, SA. In these cases, after obtaining specific
        the issuer. These securities were recorded at cost,                  authorisation from the Bank of Portugal in 2004, Caixa
        unrealised losses being fully provided for by charge to the          provided for the full amount of the unrealised losses as at
        income statement.                                                    31 December 2003, based on the stock exchange prices,
                                                                             by charge to reserves and retained earnings (Note 38.). The
      - Held-to-maturity investments – These included fixed                  subsequent reversal of these provisions in 2004 was also
        income securities with non-variable interest rates known             recognised by corresponding entry to reserves and retained
        at the issue date, with specified redemption dates, issued           earnings (Note 38.).
        by entities listed by the Bank of Portugal, Caixa having
        the intention to hold them in its portfolio until their
        maturity date. Unrealised losses were not provided for.




      Notes to the Consolidated Financial Statements | Accounting Policies
152
In accordance with Bank of Portugal rules, the difference        Securities portfolio – insurance
between cost and the redemption value of financial               In accordance with the regulations of the Chart of Accounts
instruments was normally recognised in the income                for Insurance Companies, securities held by the Group
statement on a straight-line basis up to their maturity date.    insurance companies in Portugal, recognised in the pro-forma
In the case of investment securities and held-to-maturity        financial statements, were measured as follows:
investments the difference was recorded in the heading
“Results from financial operations”. In accordance with          Fixed-income securities
IFRS, the difference is recognised in the income statement       Bonds and other fixed-income securities, except when
heading “Interest and similar income” using the effective        allocated to unit-linked insurance, were recognised at cost.
interest method.                                                 The difference between the cost and the redemption value
                                                                 of the securities was recognised in the income statement
In preparing the pro-forma accounts as at 31 December            on a straight line basis over the period to redemption.
2004, the securities and investments balances were
reclassified to IAS 39 headings, based on the classification     Up to 31 December 2001, in the case of Companhia de
adopted by the Group as from 1 January 2005. Although            Seguros Mundial – Confiança, whenever such securities
net book value remained unchanged, provisions for losses         were sold prior to their redemption date and the proceeds
on investments were deducted from the amount of the              of such sales were used to acquire other fixed-income
corresponding assets.                                            securities, any capital gains resulting from the difference
                                                                 between the amount of the sale and book value, was
The following general criteria were used for the income          amortised on a straight-line basis up to the maturity date
statement:                                                       of the security. At 31 December 2004 there were realised
- Realised and unrealised gains and losses on trading            gains not yet recorded in the income statement.
 securities were recorded in “Results from financial
 operations – Result of financial assets and liabilities held    Bonds and other fixed-income securities related to
 for trading”;                                                   unit-linked insurance were measured in accordance with
- Realised gains and losses on sales of investment securities    the following criteria:
 were recorded in “Results from financial operations –
 Result of other financial assets at fair value through profit   Listed - Measured at the closing price on the last working
 or loss”. The provisions for such securities were recorded      day within the last 30 days, on which they were traded on
 in “Other asset impairment net of reversals and                 the stock exchange.
 recovery”;
- Realised gains and losses on sales of investments were         Unlisted - Measured based on a prudent assessment of
 recorded in “Results from financial operations – Result of      their estimated realisable value, which could not be higher
 available-for-sale financial assets”. The impact of the         than cost, if issued during the year, and their nominal
 provisions for such securities on the income statement          value, if issued in previous years.
 was recognised in “Other asset impairment net of
 reversals and recovery”.                                        The maximum carrying amount of defaulting bonds was
                                                                 based on percentages defined by the ISP (Portuguese
The impact of transition at 1 January 2005 resulted              Insurance Institute), which decrease based on the time
essentially from recognition of unrealised gains, on the         elapsed since the default date.
former investment portfolio and recognition of additional
impairment losses on investments in relation to those
already recognised in accordance with Bank of Portugal
Notice 4/2002 (Note 43.).




                                                                              Notes to the Consolidated Financial Statements | Accounting Policies   153
      Variable or mixed-income securities
                                                                                        Unrealised     gains    and    losses   determined   on    the
      Listed - Measured at the closing price on the last working                        measurement of investments relating to unit-linked
      day within the last 30 days, on which they were traded on                         products were recognised in profit or loss, with a
      the stock exchange.                                                               compensating entry to the heading “Liability to subscribers
                                                                                        of unit-linked products”.
      Unlisted - Measured based on a prudent assessment of
      their estimated realisable value, which could not exceed:                         Realised capital gains and losses
      - Shares and quotas: their proportion of the equity value of                      Gains and losses resulting from the difference between the
        the respective company, in accordance with the last                             amount of the sale of investments and their respective
        available balance sheet;                                                        book values at 31 December of the preceding year, in the
      - Share subscription rights of listed companies which have                        case of investments acquired in previous years, and
        increased their share capital: listed price of the definitive                   between the amount of the sale and the cost of
        securities, that should reflect the capital increase;                           investments acquired during the year, are recognised in the
      - Investment units in unit trust investment funds: net equity                     heading “Results from financial operations”.
        as at the balance sheet date;
      - Participating bonds: nominal value;                                             In the case of investments acquired in previous years and
      - Short term debt securities - commercial paper: cost;                            sold during the year which were allocated to technical
      - Securities of former Portuguese colonies (companies with                        provisions for non-life insurance, life insurance without
        registered office therein): cost.                                               profit-sharing and unallocated, the positive or negative
                                                                                        differences between cost and book value at the beginning
      Unrealised capital gains and losses                                               of the year were recognised in the income statement
      Unrealised gains and losses on the measurement of                                 heading      “Results   from     financial   operations”    by
      investments were recognised in the headings “Technical                            corresponding entry to the equity heading “Statutory
      provisions for insurance contracts - Fund for future                              revaluation reserve”.
      payments” (“the Fund”) or “Statutory revaluation reserve”
      (reclassified to “Fair value reserve”, under IFRS accounts),                      In the case of investments acquired in previous years and
      depending on whether the securities were allocated to life                        sold during the year which were allocated to technical
      insurance with profit-sharing, or non-life insurance, life                        provisions for life insurance with profit-sharing, the positive
      insurance         without          profit-sharing           or     unallocated,   or negative differences between cost and book value at the
      respectively. If the unrealised losses exceed the balance of                      beginning of the year that were recognised in the “Fund
      the Fund or Reserve, the excess was recognised as a cost                          for future payments”, remain recorded in this heading.
      for the year.
                                                                                        The insurance activity securities portfolio was classified in
      The statutory revaluation reserve was only used for the                           the heading “Available–for-sale financial assets”. The
      following purposes, and in accordance with the following                          impact of transition at 1 January 2005 resulted essentially
      order of priorities:                                                              from measurement of debt instruments at fair value (Notes
      - To offset unrealised losses on investments;                                     8. and 43.).
      - To cover accumulated losses up to the end of the year in
        which it was recorded;                                                          Derivatives and hedge accounting
      - To record realised gains and losses on investments                              In accordance with Bank of Portugal rules, trading
        (comprising unrealised gains and losses, arising in                             derivatives, except for currency swaps, were measured at
        previous years, on investments sold during the year);                           fair value. In the case of currency swaps the forward
      - Incorporation into share capital.                                               segment of the swap, less the premium or discount to be
                                                                                        amortised, was included in the revaluation of the spot




      Notes to the Consolidated Financial Statements | Accounting Policies
154
segment. Premiums or discounts resulting from the               - Provision for doubtful loans – Recorded to cover
difference between the spot and forward exchange rates           principal not yet due on loans with unpaid instalments of
were amortised over the term of the operation, the               principal or interest, or relating to customers with other
respective cost or income being recorded.                        overdue loans, in accordance with specific criteria defined
                                                                 by the Bank of Portugal. The percentages to be provided
Hedging operations were not usually measured at fair value,      corresponded, in whole or in part, to those applied on
their income being consistently recognised with that of the      the overdue credit on the operations. The credits under
hedged item which, in most cases, was measured at cost.          these conditions were only considered overdue for
Accordingly, in the case of interest rate swaps, only accrued    provision purposes.
interest payable and receivable was recorded. In addition,
hedging options entered into to hedge embedded derivatives      CGD also recorded an additional provision for doubtful
in debt issues or customer deposits were not measured at fair   loans, based on an analysis of the estimated realisable
value only the net cost payable by Caixa being accrued.         value of a group of loans.


In preparing the pro-forma accounts as at 31 December           - Provision for country risk - Recorded to cover
2004, interest accrued on hedging operations at 1 January        realisation problems on financial asset and off-balance
2005 was reclassified to “Hedging derivatives” (assets or        sheet items over residents of countries considered by the
liabilities). All the other balances relating to derivatives     Bank of Portugal to be of risk. The percentages to be
were recognised in the headings “Financial assets and            provided were fixed by the Bank of Portugal, which
liabilities at fair value through profit or loss”.               classified the countries or territories by risk groups;


In preparing the pro-forma income statement for 2004,           - Provision for general credit risks – Was recorded as a
interest on hedging operations under the Bank of                 liability and covered risks of collection of loans granted
Portugal’s former rules was reclassified to the heading          and guarantees and sureties. This provision was
“Interest on hedging derivatives”. The result of other           calculated by the application of the following generic
operations, including interest on the remaining derivatives,     percentages to the total credit not yet due, including
was recorded as “Results from financial operations”.             guarantees and sureties:


The impact of transition at 1 January 2005, resulted               - 1.5% for consumer credit and loans to individuals for
essentially from the measurement of derivatives and the              undetermined purposes;
hedged items at fair value (Note 43.).                             - 0.5% for credits guaranteed by mortgage of property
                                                                     or real estate financial lease operations, in both cases
Provisions for credit risks                                          when the property is for the borrower’s own housing;
The provisions recorded by Caixa and its subsidiaries with         - 1% for other credit.
head office in Portugal complied with Bank of Portugal Notice
3/95 of 30 June, as amended by Notice 8/2003 of 30 January.     In preparing the pro-forma accounts as at 31 December
In this respect the following provisions were recorded:         2004, the above mentioned provision balances were
                                                                maintained, the part of the provision for general credit risks
- Provision for overdue credit and interest – Recorded          corresponding to credit granted being transferred to assets,
 to cover overdue instalments of principal and interest.        and deducted from the amount of loans and advances to
 The percentages of overdue credit and interest to be           customers.
 provided depended on the type of guarantee securing
 the loans and increased in proportion to the period
 elapsed since the default date.




                                                                             Notes to the Consolidated Financial Statements | Accounting Policies   155
      Other situations
                                                                             liabilities, including goodwill arising on the acquisition, were
      In accordance with IFRS, certain fees, commissions and                 therefore recognised in “Non-current assets held for sale”
      other costs or income received and paid on credit                      and “Non-current liabilities held for sale”. No impairment
      operations and other financial instruments are included in             was recognised, as the Group believes that the amount of
      amortised cost and recognised as costs or income over the              the sale of Nutricafés, less costs to be incurred on the sale,
      period of the operations, using the effective interest rate            will exceed its net book value at 31 December 2005.
      method. In accordance with the Bank of Portugal’s former
      rules, these costs or income were recorded on as cash                  2.8. Assets Received on the Recovery of
      basis.                                                                 Loans
                                                                             Property and other assets received as settlement of
      2.7. Non-current Assets Held for Sale                                  defaulting loans which do not meet the requirements to be
      and Disposal Groups                                                    recognised in the heading “Non-current assets held for
      IFRS 5 – “Non-current assets held for sale and discontinued            sale” are initially recognised in “Other assets – assets
      operations” applies to single assets or groups of assets to            received as settlement of defaulting loans” at the
      be disposed of, by sale or other means together as a group,            repossessed values, by corresponding entry to "Other
      in a single transaction, and all liabilities directly associated       liabilities”. The amount in the heading “Other liabilities” is
      with such assets, that will be transferred in the transaction          reversed when the respective legal proceedings have been
      (referred to as “disposal groups”).                                    completed, by credit to the overdue loan.


      Non-current assets or disposal groups are classified as held           Periodic appraisals of property received as settlement of
      for sale whenever their book value is expected to be                   defaulting loans are obtained. Impairment losses are
      recovered by sale and not by continuing use. For an asset              recognised, in the heading “Impairment of other assets net
      (or group of assets and liabilities) to be classified under this       of reversals and recovery” when the appraisal amount, less
      heading, the following requirements must be met:                       the estimated costs to be incurred on the sale of the
      - There must be a high probability of sale;                            property, is lower than the book value.
      - The asset must be available for immediate sale in its
        present condition;                                                   When promissory contracts for the sale of repossessed
      - The sale must be expected to occur within a year of                  assets are signed, the amount of the sale is recognised in
        classification of the asset in this heading.                         “Other assets” by corresponding entry to “Other
                                                                             liabilities”. On the date the effective sale contract is signed,
      Assets recognised in this heading are not amortised and are            or the date the assets are effectively transferred, the liability
      measured at the lower of cost or fair value less costs to sell.        is reversed by credit the heading “Assets received as
      Fair value of these assets is determined based on appraisals           settlement of defaulting loans”.
      by experts.
                                                                             2.9. Investment Property
      If book value exceeds fair value less costs to sell, impairment        Investment property corresponds to property held by the
      losses are recognised in the heading “Impairment of other              Group with the objective of obtaining income from rental
      assets, net of reversals and recovery”.                                and/or increase in value.


      At 31 December 2005 this heading included the assets and               Investment properties are not depreciated and are
      liabilities of Nutricafés - Cafés e Restauração, SA                    measured at fair value, determined annually based on
      (“Nutricafés”). As explained in Note 3., this company was              expert appraisals. Fair value changes are recognised in the
      acquired by the Group at end 2005, with the purpose of                 income statement heading “Other net operating income”.
      being sold in the short term. Nutricafés' assets and




      Notes to the Consolidated Financial Statements | Accounting Policies
156
2.10. Other Tangible Assets                                   Depreciation is recognised as a cost for the year.
Other tangible assets are recognised at cost, less
depreciation and accumulated impairment losses. The cost      Periodic tests are made to identify evidence of impairment
of repairs and maintenance and other expenses associated      of other tangible assets. Impairment losses are recognised
with their use are recognised in the income statement         in the income statement heading “Impairment of other
heading “Other administrative costs”.                         assets net of reversals and recovery” whenever the net
                                                              book value of tangible assets exceeds recoverable value.
Up to 1 January 2004 Caixa and some subsidiaries              Impairment losses can be reversed with an impact on profit
recorded revaluations of tangible assets under the terms of   or loss if the recoverable value of an asset subsequently
the applicable legislation. As permitted under IFRS 1, upon   increases.
transition to IFRS, the book value of the assets, including
the revaluations, was considered as deemed cost, as their     The Group periodically assesses the adequacy of the useful
result at the dates they were made corresponded broadly       life of its tangible assets.
to cost or depreciated cost under IFRS, adjusted to reflect
the changes in price level indices.                           2.11. Finance Leasing
                                                              Finance leasing operations are recorded as follows:
Property for own use held by the Group’s insurance
companies was measured at fair value, in accordance with      As Lessee
the rules defined by the Chart of Accounts for Insurance      Assets purchased under finance leasing agreements are
Companies. On transition to IFRS, the book value of such      recorded at fair value in “Other tangible assets” and liabilities
property was considered to be its deemed cost, as             and the respective depreciation thereon calculated.
permitted under IFRS 1.
                                                              Lease instalments are divided in accordance with the respective
Depreciation is recorded on a straight-line basis over the    financial plan, under which the liability is reduced by principal
estimated useful lives of the assets, which correspond to     repayment component of the instalments and the interest
the periods over which the assets are expected to be          component is recognised in “Interest and similar costs”.
available for use, which are:
                                                              As Lessor
                                                  Years of    Leasing assets are recognised in the balance sheet as “Loans
                                              useful life     and advances to customers”, and are repaid in accordance
Property for own use                              50 - 100    with the financial plan as at out in the contracts. Interest
Equipment:                                                    included in the instalments is recognised in the heading
  Furniture and materials                               8     "Interest and similar income”.
  Machines and tools                                5 - 14

  Computer equipment                                 5-8      2.12. Intangible Assets
  Interior fittings                                 8 - 10    This heading comprises essentially the cost of acquiring,
  Vehicles                                           4-6      developing and preparing for use the software used in
  Security equipment                                8 - 10    Group’s operations. Where the requirements of IAS 38 –
                                                              Intangible assets are met, the internal costs incurred in
Land is not depreciated.                                      developing software are capitalised as intangible assets. These
                                                              costs are made up exclusively of staff costs.
The cost of leasehold improvements to property occupied
by Group companies is capitalised under this heading and      Intangible assets are carried at cost less accumulated
depreciated over an average period of 10 years.               amortisation and impairment losses.




                                                                            Notes to the Consolidated Financial Statements | Accounting Policies   157
      Intangible assets are amortised to the income statement on a                     CGD did not make any adjustment to income tax for 2005 as
      systematic basis over the estimated useful life of the assets,                   a result of applying this article.
      which is normally between 3 and 6 years.
                                                                                       Income tax of foreign subsidiaries is calculated and recorded
      Software maintenance costs are recognised as a cost for the                      based on the regulations in force in the respective countries.
      year in which they are incurred.
                                                                                       In addition, under Article 60 of the IRC Code, income earned
      2.13. Income Tax                                                                 by non-resident entities, benefiting from a clearly more
      All Group companies are taxed individually, and those with                       favourable tax regime is imputed to Caixa, in proportion to
      head offices in Portugal, namely CGD, are subject to the                         its participation and independently of distribution, provided
      regime laid out by the Portuguese Corporate Income Tax                           that Caixa has a direct or indirect participating interest of at
      Code (Código do IRC or “IRC”). The branches’ accounts are                        least 25%, or at least 10% if the non-resident company is
      included in the head office accounts for tax purposes. In                        directly or indirectly owned in more than 50% by resident
      addition to being subject to IRC, the net income of branches                     partners.
      is also subject to local taxes in the countries/territories in
      which they operate. Local taxes are deductible from the                          A company is considered to benefit from a clearly more
      head office’s tax under article 85 of the Corporate Income                       favourable regime (i) when it is resident in a territory listed
      Tax Code and Double Taxation Agreements entered into by                          in Ministerial Order 150/2004 of 13 February, or (ii) when
      Portugal.                                                                        it is not locally subject to income taxes identical or similar
                                                                                       to IRC, or (iii) when the income tax effectively paid is equal
      Under article 33 of the Statute of Tax Benefits, the offshore                    to or less than 60% of the IRC that would have been paid
      subsidiaries of CGD and Caixa - Banco de Investimento, SA                        if the company were resident in Portugal. In these cases,
      in the Autonomous Region of Madeira benefit from IRC                             the net income in question is added to Caixa’s taxable
      exemption up to 31 December 2011. For the purposes of                            income for the year in which non-resident company’s tax
      applying this exemption, 85% of the taxable income of the                        period ends. Imputed income is deductible from taxable
      entity’s global activity results from operations outside the                     income for the year in which profits are eventually
      institutional scope of the Madeira Free Trade Area (80%                          distributed to Caixa. Caixa does not record a deferred tax
      between 1 January 2003 and 31 December 2004).                                    asset for this situation.


      Article 86 of the IRC Code, introduced by the State Budget                       The total income tax cost recognised in the income
      Law for 2005, establishes that taxable income, net of                            statement includes current and deferred tax.
      deductions relating to international double taxation and tax
      benefits, may not be less than 60% of the amount which                           Current tax is calculated based on taxable income for the
      would be determined if the taxpayer did not benefit from:                        year, which differs from accounting income owing to
                                                                                       adjustments to taxable income resulting from costs or
      - The tax benefits referred to in item 2 of article 86;                          income that are not considered for income tax purposes or
                                                                                       that will be considered in future accounting periods.
      - The deduction of supplementary contributions to pension
        funds and similar to cover pension liabilities, as a result of                 Deferred tax consists of the impact on the tax to be
        applying         International          Accounting           Standards,   as   recovered/paid in future periods resulting from temporary
        determined by the Bank of Portugal;                                            deductible or taxable differences between the book value of
                                                                                       assets and liabilities and their tax basis, used to determine
      - Deduction of tax losses transferred under corporate                            taxable income.
        mergers.




      Notes to the Consolidated Financial Statements | Accounting Policies
158
Deferred tax liabilities are normally recognised for all           relating to the impact of transition to the new accounting
temporary taxable differences, whereas deferred tax assets         rules were calculated based on assumptions which may, or
are only recognised to the extent that it is probable that         may not be ratified by the tax authorities in the future.
future taxable income will be generated, allowing the use of
the corresponding deductible tax differences or tax losses         CGD has considered as tax deductible costs for the year,
carried forward. In addition, deferred tax assets are not          those supported or recorded, among others, as contributions
recognised where their recoverability may be questioned due        to the pension funds, up to the limit of 25% of its staff
to other situations, including issues regarding the                costs, in the form of remuneration, wages or salaries for the
interpretation of the tax legislation in force.                    year.


Deferred taxes are not recognised in the following situations:     In accordance with a recent statement of the Secretary of
- Temporary differences arising from goodwill;                     State for Tax Affairs on this matter, the cost recorded under
- Temporary differences arising from the initial recognition of    the terms of the applicable accounting standards, is
 assets and liabilities on transactions which do not affect        deductible for purposes of determining taxable income, up
 accounting income or taxable income;                              to the limit of amounts effectively paid to the pension fund.
- Taxable tax differences relating to undistributed profits of
 subsidiaries and associates, to the extent that the Group is      The amount recognised by CGD in 2005, as a charge to
 able to control their reversal and it is not likely to occur in   equity in the non-consolidated accounts (relating to
 the foreseeable future.                                           recognition of one-fifth or one-seventh of the increase in the
                                                                   liability resulting from application of the Adjusted
The main situations originating temporary differences in the       Accounting Standards) plus the other costs recognised
CGD Group are provisions temporarily not tax deductible,           during the year, does not exceed the limit of 25% of the
employee benefits, measurement of financial derivatives,           payroll. Therefore, considering that CGD’s tax deductible
deferred commissions and tax losses carried forward .              costs up to 31 December 2005, are less than the amounts
                                                                   effectively paid to the pension fund (a condition required
Deferred taxes are calculated at the tax rates expected to         under the terms of the understanding of the Secretary of
apply to the period in which the temporary differences             State for Tax Affairs), such amounts are considered to be tax
reverse, based on tax rules that have been enacted or              deductible costs.
substantially enacted at the balance sheet date.
                                                                   2.14. Provisions and Contingent Liabilities
Income tax (current or deferred) is recorded in profit or loss     A provision is recorded whenever a present obligation
for the year, except where the tax arises from transactions        (legal or constructive) exists as a result of a past event
that have been recognised directly in equity (such as              involving the probable future outflow of resources and this
unrealised gains and losses on available-for-sale financial        can be reliably determined. The amount of the provision
assets). In such cases the corresponding tax is also               comprises the best estimate of the amount to be paid to
recognised as a charge to equity and does not affect income        settle the liability as at the balance sheet date.
for the year.
                                                                   When the outflow of resources is not probable, a
As from 1 January 2005 the non-consolidated financial              contingent liability exists. Contingent liabilities need only
statements of CGD and the Group entities subject to                be disclosed, unless the probability of their payment is
supervision of the Bank of Portugal were prepared in               remote.
accordance with the Adjusted Accounting Standards
(Normas de Contabilidade Ajustadas - NCA) established by           Provisions for other risks are to cover:
Bank of Portugal Notice 1/2005. Current and deferred taxes         - Liability for guarantees provided and other off-balance




                                                                                Notes to the Consolidated Financial Statements | Accounting Policies   159
        sheet commitments determined based on a risk analysis                Gains and losses resulting from differences between actuarial
        of operations and the respective customers;                          and financial assumptions and the effective amounts as
      - Legal, tax and other contingencies resulting from the                regards the liability and expected income of the pension
        Group’s activity.                                                    funds, as well as those resulting from changes in the actuarial
                                                                             assumptions, are deferred in an asset or liability heading
      2.15. Employee Benefits                                                (“corridor”) up to the limit of 10% of the present value of
      Liabilities for employee benefits are recognised in                    the past service liability or the value of the pension funds (or,
      accordance with IAS 19 – Employee Benefits. The principal              if applicable, the provisions recorded), whichever is greater, at
      benefits granted by Caixa include retirement and survivor              the end of the current year. If the actuarial gains and losses
      pensions, healthcare and other long term benefits.                     exceed the limit of the “corridor”, the excess is recognised in
                                                                             the income statement over the average period up to the
      Liability for Pensions and Healthcare                                  normal retirement age of the employees covered by the plan.
      The CGD Group has several pension plans, including defined
      benefit plans and, in some cases, defined contribution plans.          The limits referred to in the preceding paragraph are calculated
      Caixa, Companhia de Seguros Fidelidade – Mundial, SA                   and applied separately for each defined benefit plan.
      (Fidelidade-Mundial) and Império – Bonança, Companhia de
      Seguros, SA (Império-Bonança) are responsible for the                  As permitted under IFRS 1, on the transition date the Group
      payment of retirement, disability and survivor pensions to             did not recalculate the deferred actuarial gains and losses
      their employees, under the terms explained in Note 36..                since the inception of the plans (option usually referred to as
      Other Group companies also have defined benefit plans,                 “reset”). Accordingly, the impact of the transition to IFRS as
      namely Banco Comercial do Atlântico, SA, Banco Simeón, SA              at 1 January 2004 results from:
      and Banco Nacional Ultramarino, SA (Macao).                            - Reversal of the deferred actuarial gains and losses
                                                                              recognised in CGD’s accounts at 1 January 2004, relating to
      In addition, healthcare for CGD’s (Head Office) active and              recognition of the pension liability in accordance with the
      retired employees is provided by the Caixa Geral de Depósitos           previous accounting standards;
      Social Services (“Social Services”), which is funded by                - The change in actuarial assumptions;
      contributions by CGD’s head office and its employees. Caixa            - Recovery of insufficiencies of provisions; and
      also has liabilities for contributions for SAMS (Healthcare) for       - Recognition of the liability for post-employment healthcare,
      employees of the former BNU that retired prior to the 23 July          which was recognised by corresponding entry to retained
      2001 merger of BNU into CGD.                                           earnings (Note 43.).


      The liability for the defined benefit plans recognised on the          The Group does not usually assume any liability for defined
      balance sheet comprises the difference between the present             contribution plans, other than its annual contribution and so
      value of the liability and the fair value of pension funds’            no additional costs are recorded.
      assets, adjusted, where applicable, for deferred actuarial
      gains and losses. The total liability is determined annually by        The net amount of the cost of retirement pensions and
      specialised actuaries, using the Projected Unit Credit method          healthcare for the year, including current service cost and
      and other actuarial assumptions considered to be appropriate           interest cost, less expected income, as well as amortisation of
      (Note 36).. The discount rate used to discount the liability           actuarial gains and losses, is recognised in the appropriate
      reflects market interest rates for high-quality corporate bonds        “Staff costs” heading.
      denominated in the currencies in which the liabilities are to
      be paid and with maturities similar to the average settlement          The impact of the retirement of employees prior to the
      period of the liability.                                               normal retirement age defined in the actuarial study is
                                                                             recognised directly in “Staff costs”. In addition, Caixa has




      Notes to the Consolidated Financial Statements | Accounting Policies
160
recorded a specific liability for the impact of the change to      The main impacts on the financial statements of the
non-active status of employees with whom it has entered into       insurance companies owned by the Group, resulting from
suspension of labour agreements. This provision is also            the introduction of IFRS 4, are set out below:
recorded as a charge to the income statement heading “Staff        i) Classification of contracts written or acquired by the
costs”.                                                               Group as insurance or investment contracts. Contracts
                                                                      with a significant insurance risk are classified as insurance
Other Long Term Benefits                                              contracts and recorded in accordance with IFRS 4.
The Group also has other long term benefit liabilities in             Contracts not having a significant insurance risk are
respect of its employees, including a liability for the               classified as investment contracts and recorded in
payment of long service bonuses and death grants prior to             accordance with IAS 39.
normal retirement age.                                                On transition to IFRS, the Group classified, as investment
                                                                      contracts, certain life insurance contracts, formerly
The liability for such benefits is also determined based on           recorded as insurance contracts. These are recorded in
actuarial calculations. However, in accordance with                   the “Customer resources” heading.
IAS 19 actuarial gains and losses cannot be deferred, and             In addition, as permitted by IFRS 4, the Group did not
so they are fully recognised in profit or loss for the period.        change its accounting policies for investment contracts
                                                                      with profit sharing that include a discretionary
Short Term Benefits                                                   participation feature and therefore continues to recognise
Short term benefits, including productivity bonuses paid to           premiums written as income and corresponding increases
employees are recognised on an accruals basis in “Staff               in liabilities as a cost.
costs” for the respective period.                                     Unrealised gains, net of losses, arising from the
                                                                      measurement of assets covering insurance contracts with
2.16. Insurance                                                       profit sharing are split up between a liability and an
a) Adoption of IFRS 4 – Insurance Contracts                           equity component, based on contracts´ terms and
Transactions relating to insurance contracts written and              conditions and on the company’s past experience.
reinsurance contracts held by the Group are recorded in
accordance with IFRS 4 – “Insurance contracts”. This standard      ii) The provisions for exceptionally large claims recorded in
allows issuers of insurance contracts to maintain the                 accordance with the Chart of Accounts for Insurance
accounting policies used prior to the adoption of IFRS,               Companies were reversed, as catastrophe or equalisation
provided that certain minimum requirements, established by            provisions are not allowed under IFRS 4.
that standard, are complied with. These include the
requirement of a test of the adequacy of recognised insurance      b) Recognition of Income and Costs
liabilities, with reference to each balance sheet date.            Premiums on non-life insurance, life insurance and
                                                                   investment contracts with discretionary profit sharing,
Consequently, insurance contracts written and reinsurance          are recognised as income when written, in the
contracts held by the Group were recorded in accordance with       “Premiums, net of reinsurance ” heading, in the income
the accounting policies established in the Chart of Accounts for   statement.
Insurance Companies (“Plano de Contas para as Empresas de
Seguros”-PCES), approved by rule 7/94 of 27 April of Instituto     Premiums written on non-life insurance contracts and
de Seguros de Portugal (Portuguese Institute of Insurance –        associated acquisition costs are recognised as income
ISP) and other ISP standards, complemented by the changes          and cost on a pro-rata basis over the term of the related
arising from the introduction of IFRS 4.                           risk periods, through changes in the provision for
                                                                   unearned premiums.




                                                                                 Notes to the Consolidated Financial Statements | Accounting Policies   161
      Insurance liabilities related to life insurance contracts and                    assistance expenses and provision for lifelong assistance
      investment contracts with discretionary profit sharing are                       expenses.
      recorded in the “Life insurance mathematical provision”
      heading.         This provision and the respective cost are                      The mathematical provision for labour accident insurance
      recognised simultaneously with the income associated                             reflects the liability for:
      with premiums written.                                                           i) Pensions payable on claims whose amounts have
                                                                                            already been ratified by the Labour Court;
      c) Provision for Unearned Premiums and
      Deferred Acquisition Costs                                                       ii) Estimated pension liabilities regarding claims already
      The provision for unearned premiums reflects the portion                              occurred but awaiting a final settlement agreement or
      of non-life insurance premiums written attributable to                                ruling, referred to as “defined pensions”;
      future years, namely the portion corresponding to the
      period between the balance sheet date and the end of                             iii) Estimated pension liabilities regarding claims already
      the period to which the premium refers. It is calculated,                             occurred but where the respective clinical procedures
      for each contract in force, by the application of the pro                             have not been completed at the balance sheet date
      rata temporis method to the respective gross premiums                                 or pensions payable in respect of claims occurred but
      written.                                                                              not reported, referred to as “presumed pensions”.


      Expenses incurred on the acquisition of insurance                                The assumptions and technical bases used for calculating
      contracts, including commission paid to agents and others,                       mathematical provisions for labour accident insurance,
      and other expenses allocated to the acquisition function,                        relating to ratified or defined pensions are set out below:
      are deferred and recorded in the income statement over
      the respective period and recognised as a deduction from                                                                Mandatorily                       Non
      the technical provisions for insurance contracts, in the                                                                Redeemable                Redeemable          (*)


      “Provisions for unearned premiums” heading.                                      Mortality table                           TD 88/90               TD 88/90 (Men)

                                                                                                                                                      TV 88/90 (Women)
      In accordance with ISP rules, deferred acquisition costs                         Discount rate                              5.25%                          4%
      on each technical insurance business may not exceed                              Management charges                         2.40%                          4%
      20% of the respective deferred premiums.                                         (*) A single mortality table was used to calculate the mathematical provisions for Império-
                                                                                       Bonança, assuming a proportion of sixty five per cent for men and thirty five per cent for
                                                                                       women.



      d) Provision for Claims                                                          The estimated mathematical provision for presumed
      This provision reflects the estimated amounts payable for                        pensions on labour accident insurance is based on the
      claims, including claims that have occurred but have not                         historical development of variables that are relevant in
      been reported (IBNR) and of future administrative costs to                       the calculation of mathematical provisions.
      be     incurred        on     the     settlement          of    claims   under
      management and IBNR claims. With the exception of                                In accordance with current legislation, the liability
      labour accident insurance, mathematical provisions and                           resulting from the annual increase in pensions is covered
      provisions for lifelong assistance, the provisions for claims                    by FAT (“Fundo de Acidentes de Trabalho” - Labour
      recorded by the Group are not discounted.                                        Accident Fund). Insurance companies pay the pensions in
                                                                                       full and are subsequently reimbursed for the share
      Provision for labour accident insurance claims                                   corresponding to FAT’s liability. FAT is managed by the
      The provision for labour accident insurance claims includes                      Portuguese Insurance Institute, the income of the fund
      the mathematical provision, provision for temporary                              consisting of contributions made by the insurance




      Notes to the Consolidated Financial Statements | Accounting Policies
162
companies and labour accident insurance policyholders.             This analysis is performed for the principal types of
A liability is recorded for future contributions to FAT in         insurance business, representing more than 90% of the
respect of pension liabilities existing at the balance sheet       provision for claims, namely motor, labour accidents,
date.                                                              personal accidents and health.


The provision for temporary assistance expenses                    These estimates include direct liabilities to claimants
recognises the liability for expenses on labour accident           (whether claims are reported or not) as well as future
insurance claims, other than lifelong expenses. The                payments, notably contributions to FAT.
calculation is based on actuarial models applied to run-
off matrices on such expenses.                                     These estimates are based on payment triangles using
                                                                   deterministic chain ladder or average link-ratio models.
The provision for lifelong assistance expenses is
calculated using the following technical bases:                    e) Provision for Premium Insufficiency
                                                                   This is calculated for all non-life insurance and provides
                                                                   for situations in which premium income recognisable in
Mortality table             35%*TV 88/90 + 65%*TD 88/90            future years, on contracts in force at the balance sheet
Discount rate                              4%                      date is less than the amount of claims payable and
Inflation rate                             2%                      expenses allocated to the respective insurance business.
Management charges                         2%                      This provision is calculated on the basis of claims,
                                                                   expenses, reinsurance coverage and income ratios in
In-house historical information databases are used to              accordance with ISP rules.
calculate labour accident provisions.
                                                                   f) Mathematical Provision on Life Insurance
Provision for motor insurance claims                               Reflects the present value of future payments to life
The opening of a Motor insurance claim automatically               insurance beneficiaries (net of future collections),
generates the recording of an initial average provision for        calculated for each contract using actuarial methods in
each sub-claim, that affects the unit at risk and the              accordance with the respective technical bases.
relevant insurance coverage. The automatic provision is
also dependent on the seriousness of bodily harm, if any.          The results of the liability adequacy test are compared
This provision may be revised, whenever the claims                 with recorded mathematical provisions, plus a shadow
manager verifies its inadequacy. Adjustments are made              reserve. If the result of the liability adequacy test is higher,
as a result of information received (specialised technical         the difference is recorded in the mathematical provisions
reports) during the claim settlement period, i.e. the              in order to obtain the final amount of the liability.
available provision becomes a result of a specific analysis.
                                                                   The shadow reserve comprises the percentage of the
Provision for claims on other types of insurance                   Fund for Future Payments and the unrealised gain on
The provision for claims on other types of insurance is            fixed-income securities payable to beneficiaries.
calculated on a case by case basis by the claims manager
and revised whenever updated information is obtained               The liability adequacy test is described in Note 2.16. j).
from specialised technical reports.
                                                                   g) Profit Sharing Provision
The analysis of the adequacy of provisions for all types of        This reflects the portion of net income on portfolios
insurance is assessed/validated, throughout the year by the        allocated to life insurance contracts with profit sharing,
responsible actuary, who produces a specific report at year-end.   to be distributed to the respective insurance contracts.




                                                                                Notes to the Consolidated Financial Statements | Accounting Policies   163
      Capitalisation products have an associated Financial                                profit sharing are split up between a liability and an
      Participation Account. The results on products with                                 equity component, based on contract’s terms and
      mortality risk are determined using Technical-Financial                             conditions and on the company’s past experience.
      Accounts or even solely on the basis of Technical
      headings, if the contract does not have any savings                                 The allocation of the amounts of profit sharing between
      component, in the classic sense of the term.                                        the insured and company is based on profit sharing plans
                                                                                          or on the preceding year’s allocation, if different from
      The individual allocation of investment balances to                                 the conditions set out in the plan.
      insurance contracts is based on objective criteria, such as in
      proportion to risk premiums, mathematical provisions                                Liabilities under insurance contracts and investment
      recorded in the balance sheet or insured capital, depending                         contracts with discretionary profit sharing are included in
      on the type of insurance, respecting each contract’s                                the liability adequacy tests performed by the Group.
      contribution to the creation of the respective benefit.
                                                                                          i) Derivatives Embedded in Insurance Contracts
      h) Insurance and Investment Contracts with                                          As permitted by IFRS 4, policyholders’ options to
      Discretionary Profit Sharing                                                        surrender insurance contracts in force for a fixed amount
      As permitted under IFRS 4, the Group maintained most                                or for a fixed amount plus an interest component, are
      of its accounting policies on insurance contracts and                               not separated from the host contract.
      investment contracts with profit sharing, in cases in
      which the profit sharing includes a discretionary                                   j) Liability Adequacy Tests
      component. Therefore, it continues to recognise                                     In accordance with IFRS 4, at the balance sheet date the
      premiums received as income and the corresponding                                   company performs adequacy tests of liabilities relating to
      increase in liabilities as a cost.                                                  contracts in force. These tests include estimates of the
                                                                                          present value of future cash flows under its insurance
      An insurance or investment contract is considered to                                contracts (see 2.16. m)), including claim handling costs
      include profit sharing with a discretionary component                               and cash flows resulting from embedded options and
      when the respective contractual terms provide the                                   guarantees.
      insured the right to receive, as a supplement to the
      contract’s guaranteed benefits, additional benefits:                                If the present value of the liabilities estimated in these
                                                                                          tests exceeds the liabilities recorded in the financial
      i) That are likely to be a significant portion of the total                         statements, net of deferred acquisition costs and any
          contractual benefits;                                                           related intangible assets, the entire deficiency is added to
                                                                                          the liability and recorded as a loss in the income
      ii) Whose amount or timing is contractually at the                                  statement.
          discretion of the issuer; and
                                                                                          The methodology and main assumptions used in the
      iii) That are based on the performance of a specified                               liability adequacy tests are described below:
          pool       of     contracts,         realised       and/or         unrealised
          investment returns on a specified pool of assets held                           Life Insurance
          by the issuer, or the profit or loss of the entity that                         The liability adequacy test is performed by discounting,
          issues the contract.                                                            at the Euro Benchmark Curve market interest rate, future
                                                                                          cash flows on claims, redemptions (including early
      Unrealised gains, net of losses, arising from the                                   redemptions), fees and management charges, less future
      measurement of assets covering insurance contracts with                             cash flows from premiums.




      Notes to the Consolidated Financial Statements | Accounting Policies
164
These future cash flows are estimated for each contract        class, at 31 December 2005,were as follows:
using the companies’ secondary technical bases, which          -   Bonds: Euro 10 years risk-free rate;
are calculated based on an analysis of its historical data,    -   Shares: Euro 10 years risk-free rate, plus 3%;
as follows:                                                    -   Property: Euro 10 years risk-free rate, plus 2%;
                                                               -   Liquid assets: Euro 10 years risk-free rate, less 1.5%.
Mortality:
The distribution by age of insured persons at the              Each product’s yield comprises the average for each class
beginning and end of the period and claims during the          of assets weighted by the respective rate. The run off
year is obtained from files extracted from the companies’      from the Fund for Future Payments and unrealised capital
databases. These data are used to calculate the number of      gains on fixed-income securities are added to this
persons exposed to risk at each age. The expected number       amount to obtain the final yield.
of claims is determined by multiplying this value by the
probability of death using a given mortality table. A          These yields are used to project future profit sharing, for
comparison between the expected and the actual number          subsequent incorporation into mathematical provisions
of claims, results in the actual claims rate for the year as   and then projected upon maturities, claims and future
a percentage of the table. Mortality assumptions are           redemptions.
based on an analysis of the amounts for the last five years.
                                                               Non-life insurance
This analysis is performed separately for life insurance       The responsible actuaries regularly assess the adequacy
risk and capitalisation contracts.                             of the reserves using the analysis of the liabilities of the
                                                               companies in terms of uncertainty, contract duration,
Redemption:                                                    type   of     claim     and      expenses          incurred        on     claim
The distributions by products of the mathematical              settlements. A collection of micro or macroeconomic
provisions at the beginning and end of the year and of         scenarios to verify the adequacy thereof is also applied.
amounts redeemed are obtained from the companies’
databases. These data are used to calculate the average        k) Technical Provisions for Outwards
mathematical provisions for each product and a division        Reinsurance
of the number of redemptions by this amount gives the
annual redemption rate. An analysis of the amounts for         These provisions are determined by applying the above
the last five years enables the redemption assumption for      described criteria for direct insurance, taking into
each product to be determined.                                 account the percentages ceded, in addition to other
                                                               clauses existing in the treaties in force.
Expenses:
Expenses are split up into investment, administrative and      l) Liability to Subscribers of Unit-linked
claims-related expenses. To obtain unit costs, investment      Products
expenses are divided by the average amount of the              Liabilities   associated          with       unit-linked         investment
mathematical provisions, administrative expenses by the        contracts issued by the Group are measured at fair value,
average number of insured persons and claims expenses          determined based on the fair value of the assets in the
by the total number of claims for the year.                    investment portfolio allocated to each of the products,
                                                               less corresponding management costs.
Yield:
Future yields to be applied to the mathematical                Investment portfolios allocated to unit-linked products
provisions are determined based on an “asset mix” of           comprise      financial       assets,       including         fixed-income
each product at the balance sheet date. Yields, by asset       securities, variable-income securities, derivatives and




                                                                              Notes to the Consolidated Financial Statements | Accounting Policies   165
      deposits in credit institutions, which are measured at fair                    rendered or in a single amount if resulting from single
      value, the resulting unrealised gains and losses being                         acts.
      recognised in profit or loss for the year.
                                                                                     2.18. Issuance of Equity Instruments
      m) Impairment of Receivable Balances Relating                                  Equity instruments issued are initially recognised at the
      to Insurance and Reinsurance Contracts                                         fair value of the benefit received, net of the direct costs
      At each balance sheet date, the Group assesses the                             of issuance.
      existence of evidence of impairment on assets originated
      by insurance or reinsurance contracts, namely accounts                         Preference shares issued by the Group are classified in
      receivable from policyholders, agents, inwards and                             accordance with IAS 32. Accordingly, where the payment
      outwards reinsurers, and technical provisions for                              of dividends and/or repayment of capital are at the
      outwards reinsurance.                                                          exclusive discretion of the Group, the securities issued
                                                                                     are considered to be equity instruments. Preference
      If impairment losses are determined, the carrying amount                       shares issued by subsidiaries complying with these
      of the respective assets is reduced with a corresponding                       requirements are recognised in the consolidated balance
      charge to the income statement heading “Impairment of                          sheet heading “Minority interest”.
      other assets, net of reversals and recovery”.
                                                                                     2.19. Securities and Other Items Held
      n)      Intangible              Assets          Arising           from   the   Under Custody
      Acquisition of Insurance Contracts                                             Securities and other items held under custody, namely
      The difference between the fair value of insurance                             customers' securities, are recognised in off-balance sheet
      contracts acquired under business combinations and                             headings, at their nominal value.
      their respective book value calculated in accordance with
      Group accounting policies, that corresponds to the                             2.20. Cash and Cash Equivalents
      “value in force” of the insurance portfolio acquired, is                       In preparing the cash flow statements, the Group
      detached from goodwill at the acquisition date and                             included in the heading “Cash and cash equivalents”,
      recognised separately as an intangible asset.                                  the amounts in the balance sheet headings “Cash and
                                                                                     cash equivalents at central banks” and “Cash balances at
      “Value in force” is amortised over the term of the                             other credit institutions”.
      contracts acquired. For this purpose it is recalculated at
      each reporting date, with the changes in relation to the                       2.21. Critical Accounting Estimates
      preceding year being recognised in the income                                  and Key Judgemental Matters in
      statement.                                                                     Applying Accounting Policies
                                                                                     In applying the above mentioned accounting policies, the
      2.17. Commissions                                                              Boards of Directors of Caixa and Group companies must
      As mentioned in Note 2.6., commissions on credit                               make estimates. The estimates with the greatest impact
      operations and other financial instruments, namely                             on the Group's consolidated financial statements include
      amounts charged or paid for originating such operations,                       those set out below.
      are included in amortised cost or recognised over the
      course of the operation, using the effective interest                          Determination of Impairment Loss on Financial
      method, in the heading “Interest and similar income”.                          Assets
                                                                                     Impairment losses on loans are determined in accordance
      Commissions and fees for services rendered are usually                         with the methodology defined in Note 2.6. d).
      recognised as income during the period the service is                          Impairment of assets analysed individually is therefore




      Notes to the Consolidated Financial Statements | Accounting Policies
166
determined based on a specific assessment by Caixa,           The projections include a broad range of assumptions on
considering its knowledge of the customer’s situation         the evolution of the future operations of the units, which
and the guarantees securing the operations.                   may or not occur. Such assumptions, however, reflect the
                                                              Group’s best estimate as at the balance sheet date.
Impairment of assets assessed on a collective basis is
determined based on historical parameters for types of        Determination of Liabilities for Insurance
comparable operations, considering default and recovery       Contracts
estimates.                                                    The Group’s liability for insurance contracts is determined
                                                              using the methodologies and assumptions described in
Caixa considers that the impairment determined using          Note 2.16. above. The liability reflects a quantified
this methodology enables the risks on its loan portfolio      estimate of the impact of future events on the accounts
to be prudently and adequately recognised, taking into        of the Group’s insurance companies, based on actuarial
account the requirements of IAS 39.                           assumptions, past claims experience and other methods
                                                              accepted in the sector.
Measurement of Financial Instruments Not
Traded on Active Markets                                      Given   the     nature        of     the     insurance          operations,
As required by IAS 39, Caixa measures all financial           determination of provisions for claims and other liabilities
instruments at fair value except for those carried at         under insurance contracts is highly subjective and the
amortised cost. The valuation models and techniques           actual amounts to be paid in the future may be
described in Note 2.6. are used to value financial            significantly different from the estimates.
instruments not traded on liquid markets. The valuations
obtained correspond the best estimate of the fair value       However, the Group considers that the liability for
of the instruments at the balance sheet date. As              insurance contracts recorded in the consolidated
mentioned in Note 2.6., to ensure adequate segregation        financial statements as at 31 December 2005 reflects, on
of functions, these financial instruments are valued by a     an adequate and conservative basis, the best estimate at
body that is independent of the trading function.             that date of the amounts to be paid by the Group.


Employee Benefits                                             Determination of Income Tax
As explained in Note 2.15. above, the Group’s liability for   Income tax (current and deferred) is determined for group
post-employment benefits and other long term benefits         companies based on the rules established in the tax
granted to its employees is determined on an actuarial        legislation in force in the countries in which they operate.
basis. The actuarial calculations are based on financial      In several cases, however, tax legislation is not sufficiently
and actuarial assumptions including, among others,            clear and objective and may give rise to different
mortality, disability, salary and pension growth, return on   interpretations. Although the amounts recorded in such
assets and discount rate. The assumptions used are the        cases represent the best understanding of the responsible
best estimates of the Group and its actuaries of the          bodies of Caixa and CGD Group companies, regarding the
future evolution of the respective variables.                 appropriate tax treatment for their operations, they may be
                                                              questioned by the tax authorities.
Impairment of Goodwill
As mentioned in Note 2.3. above, the Group performs
impairment tests of goodwill at least annually. These
tests are performed based on estimates of future cash
flows to be generated by each unit tested , discounted
at appropriate rates.




                                                                            Notes to the Consolidated Financial Statements | Accounting Policies   167
      3. Group Companies and                                                                      The Group’s structure in terms of its principal subsidiaries,
      Transactions During the                                                                     by operating sector, and the financial data taken from their
      Period                                                                                      statutory non-consolidated financial statements, except
                                                                                                  when expressly indicated, are summarised below:




                                                                                                                            2005                             2004
                                                                                                            % Effective
                                                                                           Head             participating                Net                        Net
          Activity/entity                                                                  office             interest    Equity (a)   income      Equity   (a)   income
      Holding Companies
         Bandeirantes, SGPS, SA                                                           Madeira              100.00           24           (6)          30             (3)
         Caixa - Brasil, SGPS, SA (c)                                                     Madeira                   -             -            -   (230 080)        63 207
         Caixa - Gestão de Activos, SGPS, SA                                              Lisbon               100.00       26 617       4 367        26 637         4 880
         Caixa - Internacional, SGPS, SA                                                  Madeira              100.00        4 229        (117)        2 469           565
         Caixa - Participações, SGPS, SA                                                  Lisbon               100.00       48 733      18 834        29 899          (105)
         Caixa Desenvolvimento, SGPS, SA                                                  Lisbon                99.63       41 495       1 937       45 620            773
         Caixa Seguros, SGPS, SA                                                          Lisbon               100.00      818 447      66 878      403 406            (10)
         Caixaweb, SGPS, SA                                                               Lisbon               100.00        8 312      (1 916)       10 278        (3 472)
         Gerbanca, SGPS, SA                                                               Lisbon               100.00       14 442      14 421            21             (8)
         Império - Bonança, SGPS, SA                                                      Lisbon               100.00      376 062          (13)           -               -
         Inbepor, SGPS, SA (c)                                                            Lisbon                54.80       (2 418)     (2 468)            -               -

      Banking
         Banco Comercial do Atlântico, SARL                            Praia                                    59.17       16 507       1 859       15 896         1 921
         Banco Comercial e de Investimentos, SARL                    Maputo                                     42.00       35 008       8 380       35 589         5 172
         Banco Financial Português                                  São Paulo                                  100.00       10 856         200        8 089          (206)
         Banco Interatlântico, SARL                                    Praia                                    70.00        6 767         492        6 760            794
         Banco Nacional Ultramarino, SA                              Macao                                     100.00       90 501      19 605       58 286         7 341
         Banco Simeón, SA (b)                                          Vigo                                     99.75      232 480     (31 262)     165 081       (11 675)
         Caixa - Banco de Investimento, SA (b)                        Lisbon                                    99.63      247 190      25 004      201 287        21 551
         CGD - North America                                        Delaware                                   100.00            1            -           1              -
         CGD - Representação de Bancos, SA                          São Paulo                                   99.81           68         (59)          96          (223)
         Mercantile Lisbon Bank Holdings, Ltd.                    Johannesburg                                  91.75       72 101       8 465       61 810       (26 769)
         Caixa Geral de Depósitos - Subsidiária Offshore de Macau    Macao                                     100.00        5 703         396            -              -

      Insurance
         Cares - Companhia de Seguros, SA                                                  Lisbon              100.00       12   918     3 130       10 765          1 647
         Companhia de Seguros Fidelidade Mundial SA (b)                                    Lisbon              100.00      994   675   103 541      801 458         81 304
         Império Bonança - Companhia de Seguros, SA                                        Lisbon              100.00      165   480    16 160            -              -
         Garantia - Companhia de Seguros de Cabo Verde, SARL                                Praia               65.31        4   132       487        3 997            476
         Via Directa - Companhia de Seguros, SA                                            Lisbon              100.00       20   900     3 362        7 787            467

      Specialised Credit
         BCI Leasing                                                                      Maputo                41.99        2 755          65        3 048             11
         Caixa Crédito - SFAC, SA                                                         Lisbon               100.00        9 543         798        8 744          1 311
         Caixa Leasing e Factoring - Instituição
             Financeira de Crédito, SA                                                     Lisbon              100.00      102 557      13 801       85 674          4 275

      Asset Management
         Caixagest - Técnicas de Gestão de Fundos, SA                                      Lisbon              100.00       24 623       4 308       22 466          2 397
         CGD Pensões - Sociedade Gestora de Fundos de Pensões, SA                          Lisbon              100.00        4 006         231        4 265            545
         Fundimo - Sociedade Gestora de Fundos de
         Imobiliário, SA                                                                   Lisbon              100.00        5 007       3 299        3 873          2 166
      Venture Capital
         A Promotora, Sociedade de Capital de Risco, SARL                                   Praia               52.69        3 194         (53)       3 247           (362)
         Caixa - Capital - Sociedade de Capital de Risco, SA                               Lisbon               99.63       23 876       5 776       20 288          1 554

      Property
         Imocaixa - Gestão Imobiliária, SA                                                 Lisbon              100.00        2 242         333        1 909          1 530
         Fidelidade Mundial - SGII, SA                                                     Lisbon              100.00       21 546         923       20 630            946

      Other Financial Entities
         CGD Finance                                                                      Cayman               100.00          263          13          251             42
         Caixa Geral Finance (d)                                                          Cayman                 0.02      610 130      10 067      253 812          3 811




      Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period
168
                                                                                                                          2005                                    2004
                                                                                                        % Effective
                                                                                         Head           participating                        Net                            Net
     Activity/entity                                                                     office           interest    Equity        (a)    income       Equity    (a)     income

Other Companies
     Caixa - Sistemas de Informação, SA                                                   Lisbon            100.00       (1 448)                -        (1 441)                 -
     Caixanet - Telemática e Comunicações, SA                                             Lisbon              80.00        1 720              48           1 648              41
     Caixaweb, Serviços Técnicos e de Consultoria, SA                                     Lisbon            100.00         1 079             363             716             524
     Culturgest - Gestão de Espaços Culturais, SA                                         Lisbon              90.00           237               1            169             (29)
     EAPS - Empresa de Análise, Prevenção e Segurança, SA                                 Lisbon            100.00            187             14             173              69
     EPS - Gestão de Sistemas de Saúde, SA                                                Lisbon            100.00         1 161             222             979             165
     Cetra - Centro Técnico de Reparação Automóvel, SA                                    Lisbon              85.00        1 031            (244)                -               -
     GEP - Gestão de Peritagens Automóveis, SA                                            Lisbon            100.00             94               8            103              77
     Hospitais Privados de Portugal - HPP Centro, SA                                      Lisbon            100.00            787            442             345             (45)
     Hospitais Privados de Portugal - HPP Norte, SA                                        Porto            100.00         5 636             464           5 172           (138)
     Hospitais Privados de Portugal - HPP Sul, SA                                          Faro             100.00            900           (278)          1 178           (664)
     HPP, SGPS, SA                                                                        Lisbon            100.00       11 293              188         11 105         (1 534)
     Servicomercial - Consultoria e Informática, Lda.                                     Lisbon            100.00         3 185              28                 -               -
     Impergesto - Assistência e Serviços, SA                                              Lisbon            100.00         1 064             234                 -               -
     Imoportal.com - Multimédia, SA                                                       Lisbon              63.00      (2 229)              12         (1 001)           (361)
     Portal Executivo - Sociedade de Serviços,
     Consultoria e Informação em Gestão, SA                                               Lisbon              75.00      (1 297)            (390)           (907)          (567)

Complementary Corporate Groupings
     Groupment d'Interet Economique                                                        Paris
     Sogrupo - Serviços Administrativos, ACE                                              Lisbon
     Sogrupo - Sistemas de Informação, ACE                                                Lisbon
     Sogrupo III - Gestão de Activos, ACE                                                 Lisbon
     Sogrupo IV - Gestão de Imóveis, ACE                                                  Lisbon

Special purpose entities and investment funds
     Fundo Nostrum Consumer Finance, FTC                                                  Lisbon                    -   396 229           (2 660)      398 889             (905)
     Fundo Nostrum Mortgage 2003-1                                                        Lisbon                    -   814 621           (1 632)      907 915             (398)
     Nostrum Mortgages PLC                                                                Lisbon                    -         872          1 034           5 075          4 535
     Nostrum Consumer Finance PLC                                                         Dublin                    -      4 717             683           4 034             (69)
     Fundo de Capital de Risco para Investidores Qualificados - Grupo CGD                 Dublin              92.30      65 416            4 618         53 294         (5 869)
     Fundo de Capital de Risco para Investidores Qualificados - PME                       Lisbon              63.93      11 496              162         11 631            (656)
     Fundo de Investimento Imobiliário Fechado Saudeinvest                                Lisbon              97.82      35 734              674                 -               -
     Fundo de Investimento Imobiliário Fechado Bonança 1                                  Lisbon            100.00       14 262              846                 -               -

Companies recorded by the proportional method
     Esegur - Empresa de Segurança, SA                                                    Lisbon              50.00        4 437           1 594           7 376          3 466

(a) Equity includes net income for the year.
(b) Data taken from consolidated financial statements.
(c) Equity excludes additional capital payments.
(d) Share capital comprises 1,000 ordinary shares of €1 each and 600,000 non-voting preference shares of €1,000 each.




                                                                                   Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period   169
      The changes in the Group’s subsidiaries in 2005 and 2004                                       incorporated in December 2005 with share capital of
      are set out below.                                                                             €50 thousand, the shareholders having also made
                                                                                                     additional capital contributions of €124 950 thousand, in
      Banco Simeón, SA                                                                               2005. Caixa Desenvolvimento sold 25% of Inbepor’s
      In 2005 Banco Simeón increased its share capital by                                            share capital to Fundo de Capital de Risco para
      €275 000 thousand, having issued 45,757,072 new shares                                         Investidores Qualificados Grupo CGD – Caixa Capital.
      with a nominal value of €6.01 each. CGD subscribed for
      45,685,240 shares at a cost of €274 568 thousand of                                         - On the date of the agreements, the sale price and shares
      which €164 732 thousand is payable in 2006 and 2007.                                           were deposited in an escrow account with Caixa.
                                                                                                     However, completion of the transactions was subject to
      This operation increased the Group’s effective participation                                   obtaining authorisation/declaration of non-opposition
      in Banco Simeón to 99.75%.                                                                     from the Portuguese Competition Authority. The
                                                                                                     purchasers were not able to appoint any member to the
      Inbepor – Investimentos em Bebidas Portugal,                                                   management boards of the companies to be acquired, or
      SGPS, SA (“Inbepor”), Compal – Companhia                                                       exercise any control over their management prior to
      Produtora             de       Conservas             Alimentares,               SA             receiving the authorisation.
      (“Compal”) and Nutricafés – Cafés e Restauração,
      SA (“Nutricafés”).                                                                          - Declaration of non-opposition to the acquisition of
      On 2 November 2005 Caixa Desenvolvimento, SGPS, SA                                             Nutricafés was decided by the Competition Authority on
      (a wholly owned subsidiary of Caixa – Banco de                                                 23 December 2005 and management of the company
      Investimento, SA) entered into two agreements for the                                          was transferred to the purchasers in the same month.
      acquisition of Compal and Nutricafés shares. The principal                                     Nutricafés was therefore included in the consolidation in
      conditions of the agreements are as follows:                                                   2005. However, given the intention to sell the
                                                                                                     investment in the short term, it was recorded in
      - Caixa Desenvolvimento and Sumolis – Companhia Industrial                                     accordance with IFRS 5 – “Non-current assets held for
        de Frutas e Bebidas, SA (Sumolis) (“the Purchasers”),                                        sale and discontinued operations” (Note 12.).
        undertake to acquire the all the share capital of Compal and
        Nutricafés, in addition to making shareholders’ loans and                                 - The Competition Authority’s non-opposition decision in
        additional capital contributions to these entities.                                          respect of Compal was made on 9 January 2006. As
                                                                                                     stated above, Inbepor’s cost to acquire Compal amounts
      - The price of the shares to be acquired was fixed at                                          to €365 000 thousand, subject to adjustment.
        €365        000      thousand          and      €61       000       thousand,                Consequently, because allocation of the cost to Compal’s
        respectively, for Compal and Nutricafés shares. The price                                    assets and liabilities has still not been completed, the
        was determined based on assumptions regarding                                                amount of goodwill arising from this operation to be
        financial indicators of Compal and Nutricafés as at                                          recorded in the Group’s consolidated accounts has still
        30 September 2005 and is subject to correction if the                                        not been determined. Compal’s equity at 30 September
        financial indicators are not confirmed by an audit of the                                    2005, excluding the effect of the qualifications included
        accounts.                                                                                    in the audit report, totalled €55 469 thousand.


      - Under the terms of the agreements, the shares will be                                     Império Bonança, SGPS, SA (Império Bonança)
        acquired by a company to be incorporated, 80% of its                                      On 16 July 2004 Caixa, Caixa Seguros and Banco
        share capital to be owned by Caixa Desenvolvimento and                                    Comercial Português, SA (BCP) entered into a “Contract
        the remaining 20% by Sumolis. In this respect, Inbepor –                                  for the purchase and sale of shares – Spot, forward and
        Investimentos em Bebidas Portugal, SGPS, SA was                                           mandate” (“the contract”). The contract refers to the




      Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period
170
shares of Império Bonança which, at 31 December 2004,               other equity rights due after the formalisation date relating
was the sole shareholder of the following entities (“the            to the shares acquired under the forward transaction.
companies”):
- Império Bonança – Companhia de Seguros, SA;                       In addition, under the contract the following operations
- Seguro Directo Gere – Companhia de Seguros, SA;                   were carried out on the formalisation date:
- Impergesto – Assistência e Serviços, SA, and
- Servicomercial – Consultoria e Informática, Lda.                  - Caixa Seguros acquired loans granted to the Companies
                                                                      in the amount of €78 600 thousand;
The contract was subject to the approval and declaration            - CGD acquired loans granted to José de Mello, SGPS, SA
of   non-opposition    by   the   competent      authorities          totalling €96 102 thousand.
(Portuguese    Insurance    Institute   and   Competition
Authority), which were granted at the end of 2004. Under            The effective transfer of the management of the
the terms of the contract, the purchase and sale of the             Companies to Caixa took place at the formalisation date.
shares was formalised on 28 January 2005 (“Formalisation            Accordingly, Caixa did not appoint any member to the
date”).                                                             management boards or exercise any control over the
                                                                    management of Companies to be acquired between
The contract established the following operations:                  16 July and 31 December 2004. In addition, as explained
                                                                    above, BCP was entitled to the net income of the
- Acquisition, on the Formalisation date, by Caixa Seguros          Companies up to 31 December 2004, through adjustment
 from BCP, of shares of Império Bonança representing                to the transaction price. Therefore, as the conditions
 70% of its capital;                                                established in IAS 27 did not exist, Império Bonança’s
- Forward acquisition, by Caixa Seguros from BCP of the             accounts were not consolidated as at 31 December 2004.
 remaining 30% of Império Bonança’s share capital.                  However, in accordance with Portuguese accounting
                                                                    regulations in force in 2004, the Group recognised in the
The price of the shares acquired in January 2005 was fixed          financial statements as at 31 December 2004, under the
at €240 100 thousand, subject to adjustment for changes             heading “Available-for-sale financial assets”, an asset
in equity between 31 December 2003 and the last day of              corresponding to the amount of the commitment to
the quarter immediately prior to the Formalisation date             purchase all Império Bonança’s shares and the respective
(31 December 2004). This adjustment resulted in a price             liability. Details on the amounts recognised as at
increase of €17 073 thousand.                                       31 December 2004 in accordance with the former


The price of the shares to be acquired on the forward
transaction was fixed at €102 900 thousand, of which
€14 939 thousand was paid on the Formalisation date.
The remaining €87 961 thousand, plus the monetary
correction as from the Formalisation date, will be paid on
16 July 2007 (Note 25.). BCP has the option to anticipate
this term, in the event that the shares of a holding
company to be incorporated by Caixa to congregate its
investments in the insurance sector are admitted for listing
on the Stock Exchange. In this case of the remaining
amount payable will be adjusted based on the market
value of the holding company’s shares. Caixa Seguros is
entitled to receive the full amount of all dividends or any




                                                       Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period   171
      accounting policies, and acquisition cost after the above
      mentioned corrections, are as follows:


      Cost of shares acquired in January 2005                                                               240 100
      Cost of shares to be acquired under the forward transaction                                           102 900
      Price adjustments – equity changes                                                                     17 073
      Amount payable recognised in “Other liabilities” (Note 25.)                                           360 073
      Costs incurred with the acquisition                                                                     1 822
      Acquisition cost as at 31 December 2004 (Note 8.)                                                     361 895
      Portion of the price relating to Seguro Directo                                                       (17 000)
      Adjustment to the acquisition price paid by Caixa Seguros                                               2 963
      Other expenses                                                                                             74
      Acquisition cost as at 31 December 2005                                                               347 932



      Goodwill on the acquisition of Império Bonança was
      determined as follows:


      Acquisition cost as at 31 December 2005                                                               347 932

      Book equity of the acquired companies                                                                 166 713

      Adjustments to equity

      - Calculation of the “value in force” (Note 15.)                                                       46 386

      - Other adjustments                                                                                   (14 667)

                                                                                                            198 432

      Goodwill (Note 15.)                                                                                   149 500




      As a result of the conditions imposed by the Competition
      Authority at the end of 2004 for the operation to be
      realised, Caixa mandated BCP Investimentos to sell the
      investment in Seguro Directo Gere – Companhia de
      Seguros,        SA,      thus      reducing         acquisition         cost      by
      €17 000 thousand.




      Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period
172
Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period   173
      Caixa Geral de Depósitos – Subsidiária Offshore                                             through the issuance of 200 000 new shares with a
      de Macau (Macao Offshore Branch)                                                            nominal value of €5 each, to be subscribed for by
      Caixa Geral de Depósitos – Subsidiária Offshore de Macau, SA                                Fidelidade-Mundial at the price of €50 each, totalling
      was formed in 2005 with share capital of 50 000 000                                         €10 000 thousand.
      patacas, corresponding to €5 181 thousand, fully
      subscribed for and paid up by Caixa. The Macao Offshore                                     Mercantile       Lisbon      Bank      Holdings        Ltd.
      Branch’s sole corporate object is to make loans and                                         (Mercantile)
      perform other offshore banking and financial activities.                                    In 2004 Mercantile increased its share capital by
                                                                                                  555 000 000 South African Rands, through the issuance of
      Caixa Seguros, SGPS, SA (Caixa Seguros)                                                     3 083 333 334 new shares with a nominal value of
      A deed to decrease and increase Caixa Seguros’ share                                        0.01 rand each and a share premium of 0.17 rand. CGD
      capital was signed on 3 March 2005 under the following                                      subscribed for 3 059 312 473 shares for the amount of
      terms:                                                                                      550 676 thousand South African Rands (corresponding to
                                                                                                  €71 612 thousand at the exchange rate in force on
      - Decrease share capital from €994 000 thousand to                                          31 December 2004).
        €397 600 thousand to cover losses of €596 400 thousand,
        by decrease in the nominal value of the shares from €5                                    CGD also recorded 5 968 408 shares of Mercantile as a
        to €2; and simultaneously,                                                                result of a foreclosure. The shares were recorded at their
                                                                                                  market value of €127 thousand at the end of September
      - Increase share capital by €50 800 thousand through the                                    2004.
        issuance of 25,400,000 shares with a nominal value of
        €2 each, subscribed for at the price of €9.26 each resulting                              Caixa     Leasing     e    Factoring      –   Instituição
        in an issue premium of €7.26 per share. The amount                                        Financeira de Crédito, SA (Caixa Leasing e
        subscribed for by Caixa totalled €235 204 thousand.                                       Factoring), Imoleasing – Companhia de Locação
                                                                                                  Financeira Imobiliária, SA (Imoleasing), Locapor
      Caixa – Brasil, SGPS, SA (Caixa Brasil)                                                     – Companhia Portuguesa de Locação Financeira
      Caixa Brasil had direct and indirect participations in the                                  Mobiliária, SA (Locapor) and Lusofactor –
      Brazilian bank Unibanco – União de Bancos Brasileiros. In                                   Companhia de Factoring, SA (Lusofactor)
      September 2005 Caixa Brasil sold these participations,                                      On 28 December 2004 a deed of merger was signed,
      recognising a capital gain of €145 413 thousand net of                                      under which the net assets of Imoleasing, Locapor and
      transaction costs and tax withheld in Brazil (Note 8.).                                     Lusofactor would be transferred to Caixa Empresas de
                                                                                                  Crédito SGPS, SA. The deed was registered on
      The Shareholders’ General Meeting of 24 November 2005                                       30 December 2004, becoming effective, for accounting
      decided to dissolve Caixa Brasil. It also approved that under                               purposes, on 31 December 2004.
      the liquidation, all the assets and liabilities would be
      transferred to the shareholder Caixa Geral de Depósitos,                                    In December 2004 Caixa Empresas de Crédito, SGPS, SA
      SA, the shareholder Caixa – Participações, SGPS, SA                                         increased its share capital by €9 950 thousand,
      receiving cash compensation in the amount corresponding                                     corresponding to the issuance of 1 990 000 shares with a
      to its percentage participation in Caixa Brasil’s equity.                                   nominal value of €5 and a share issue premium of
                                                                                                  €16.60 each, to be paid up in cash. As a result of the
      Via Directa – Companhia de Seguros, SA (Via                                                 operation its share capital was increased to 2 000 000 fully
      Directa)                                                                                    subscribed and paid up shares of €5 each, held by Caixa.
      On 28 December 2004 Via Directa’s Shareholders’ General
      Meeting approved a capital increase to be paid up in cash,




      Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period
174
After completion of the merger, Imoleasing, Locapor and               Caixa Crédito, SFAC, SA (Caixa Crédito)
Lusofactor were extinguished and all their rights and                 In August 2004 Caixa Participações, SGPS, SA acquired
obligations were transferred to Caixa Empresas de Crédito             200,000 shares of Caixa Crédito, corresponding to
SGPS, SA The incorporated companies’ assets were                      11.11% of its share capital, for €2 050 thousand. As a
recognised at their net book value as at 30 December                  result of this operation, Caixa Crédito became sole
2004.                                                                 shareholder of Caixa Crédito.


Under the terms of the merger, Caixa Empresas de Crédito              Lusogest, Sociedad Gestora de Instituciones de
SGPS, SA changed its corporate name to Caixa Leasing e                Inversión Colectiva, SA (Lusogest)
Factoring as well as its corporate object, which now                  In 2004 CGD sold 161,290 shares of Lusogest to Banco
includes carrying out the legally permitted activities of             Simeón. Subsequently Banco Simeón sold its investment to
Financial Credit Institutions, in accordance with the terms           Banco Espírito Santo SA, and the Group recorded a capital
of Decree Law 186/2002 of 21 August, namely all                       gain of €1 076 thousand (Note 33.).
operations permitted for banks, except for deposit-taking.
                                                                      Lusopensiones Sociedad Gestora de Fondos de
Caixa Geral Finance Limited (Caixa Geral                              Pensiones, SA (Lusopensiones)
Finance)                                                              In 2004 CGD sold 26,260 shares of Lusopensiones to
Caixa Geral Finance, with registered office in the Cayman             Banco Simeón. Subsequently Banco Simeón sold its
Islands, was formed in 2004 with share capital of                     participation to Banco Espírito Santo SA and the Group
€1 000, fully subscribed for and paid up by Caixa. In 2005            recorded a loss of €302 thousand (Note 33.).
and 2004 this company issued non-voting preference shares
totalling €350 000 thousand and €250 000 thousand,                    Cares – Companhia de Seguros, SA (Cares)
respectively (Note 28.). Despite not having subscribed for            In 2004 Caixa Seguros acquired 25,000 shares of this
these issues, Caixa holds all the ordinary shares.                    company from external entities for €645 thousand,
                                                                      becoming the sole shareholder of Cares.
Caixa Investimentos, SA (Caixa Investimentos)
The dissolution process of Caixa Investimentos was
completed in 2004. As a result CGD, as its sole
shareholder, received its total net assets, in the amount of
€17 817 thousand.


CGD Luxemburgo
In 2004 Caixa Participações acquired 90% of CGD
Luxemburgo’s shares from CGD, for €131 thousand,
becoming its sole shareholder. On 30 December 2004 CGD
Luxemburgo       was     liquidated,     the    amount     of
€142 thousand having been recorded as a receivable.


Caixa – Gestão de Patrimónios, SA (Caixa
Gestão de Patrimónios)
In 2004 Caixa – Gestão de Patrimónios was liquidated, its
net assets as of the date of its dissolution being transferred
to Caixa Gestão de Activos, SGPS, SA, its sole shareholder.




                                                         Notes to the Consolidated Financial Statements | Group Companies and Transactions During the Period   175
      4. Cash and Cash Equivalents                                                                   5. Cash Balances at Other
      at Central Banks                                                                               Credit Institutions
      This heading comprises the following:
                                                                                                     This heading comprises the following:
                                                            2005                   2004

      Cash                                                421 134                444 092                                                             2005     2004

                                                                                                      Cheques for collection
      Demand deposits
         with central banks                                                                                Portugal                                309 662   440 357

          Capital                                      1 566 245              2 765 378                    Abroad                                   25 456    18 397

      Accrued interest                                       1 521                   1 210                                                         335 118   458 754
                                                                                                      Demand deposits
                                                       1 988 900              3 210 680
                                                                                                           Portugal                                148 861    35 209

                                                                                                           Abroad                                  122 466    93 279
      The demand deposits at the Bank of Portugal are to comply
                                                                                                                                                   271 327   128 488
      with the legal requirements for minimum cash reserves of
                                                                                                           Accrued interest                              -       15
      the European Central Banks System (ECBS). These deposits
                                                                                                                                                   271 327   128 503
      earn interest, and correspond to 2% of the deposits and
                                                                                                                                                   606 445   587 257
      debt securities with terms of up to two years, except for
      deposits and debt securities of entities subject to the
      minimum cash reserve requirements of the ECBS.                                                 “Cheques for collection” correspond to cheques of
                                                                                                     customers of other banks sent for settlement.             These
      The funds deposited at central banks by Caixa and the                                          amounts are collected on the first days of the subsequent
      Group banks at 31 December 2005 and 2004, complied                                             year.
      with the minimum limits defined by the regulations in force
      in the countries in which they operate.




      Notes to the Consolidated Financial Statements | Cash and Cash Equivalents at Central Banks and Cash Balances at Other Credit Institutions
176
6. Loans and Advances to
Credit Institutions

This heading comprises the following:

                                                                                               2005                                   2004

Interbank Money Market                                                                        848 875                                 380 270

Term deposits

   • Portugal                                                                                 142 695                                   65 541

   • Abroad                                                                                 4 113 958                              2 862 762

Loans

   • Portugal                                                                                 270 415                                 205 526

   • Abroad                                                                                   595 741                                 252 943

Other applications

   • Portugal                                                                                   28 713                                160 001

   • Abroad                                                                                 3 169 607                              2 104 373

Purchase operations with resale agreement

   • Bank of Portugal                                                                                    -                              33 731

   • Other                                                                                      66 027                                  84 264
                                                                                            9 236 031                              6 149 411

Accrued interest                                                                                19 152                                   7 529

Overdue interest pending settlement                                                               1 554                                         -

Deferred income                                                                                 (1 146)                                    (558)

                                                                                            9 255 591                              6 156 382

Impairment                                                                                         (890)                                (6 219)

                                                                                            9 254 701                              6 150 163



The changes in impairment of loans and advances to credit
institutions in 2005 and 2004 are presented in Note 38..




                                                            Notes to the Consolidated Financial Statements | Loans and Advances to Credit Institutions   177
      7. Financial Assets at Fair
      Value through Profit or Loss

      These headings comprise the following:



                                                                                                 2005                                         2004
                                                                                           At fair value                                  At fair value
                                                                       Held for           through profit                       Held for   through profit
                                                                        trading                or loss            Total         trading      or loss          Total

      Debt instruments
      - Public issuers:
           Public debt securities                                      408 970                          -       408 970        326 598      165 785         492 383
           Treasury bills                                                94 681               106 410           201 091         38 709          243          38 952
           Bonds of other public issuers:
                Domestic                                                   3 042                17 323           20 365          2 562       16 987          19 549
                Foreign                                             1 589 885                   46 057         1 635 942      1 749 563      62 130        1 811 693

      - Issued by international financial
                organisations                                            86 037                  9 010           95 047         99 651        8 960         108 611

      - Other issuers:
           Bonds and other securities:
                Issued by residents                                    321 732             1 450 845           1 772 577       481 934    1 465 208        1 947 142
                Issued by non-residents                             1 469 144                 975 879          2 445 023      1 195 501   1 052 536        2 248 037
                                                                    3 973 491              2 605 524           6 579 015      3 894 518   2 771 849        6 666 367

      Equity instruments
                Issued by residents                                        7 455                    217           7 672         16 143       10 441          26 584
                Issued by non-residents                                  55 531                  3 268           58 799         26 797       19 827          46 624
                                                                         62 986                  3 485           66 471         42 940       30 268          73 208

      Other financial instruments
      - Trust fund units
                Issued by residents                                    180 269                366 365           546 634               -     188 239         188 239
                Issued by non-residents                                  21 965                         -        21 965               -              -                -
      - Other
                Issued by residents                                               -                     -                 -           -       2 708           2 708
                Issued by non-residents                                           -             11 342           11 342               -              -                -
                                                                       202 234                377 707           579 941               -     190 947         190 947

      Loans and receivables                                              17 322                         -        17 322               -              -                -

      Derivatives with positive fair value
         (Note 10.)
      - Swaps                                                          325 582                          -       325 582        333 216               -      333 216
      - Futures and other forward operations                               9 146                        -         9 146         15 233               -       15 233
      - Options                                                          16 412                         -        16 412         11 894               -       11 894
      - Caps and floors                                                      844                        -           844          1 296               -        1 296
                                                                       351 984                          -       351 984        361 639               -      361 639
                                                                    4 608 017              2 986 716           7 594 733      4 299 097   2 993 064        7 292 161




      Notes to the Consolidated Financial Statements | Financial Assets at Fair Value through Profit or Loss
178
Financial assets held for trading and other financial assets
at fair value through profit or loss at 31 December 2005
and 2004 include trust fund units in investment funds
managed by Group entities, in the amounts of
€501 430 thousand and €188 239 thousand, respectively.


The heading “Debt instruments” at 31 December 2005
includes securities with a book value of €1 580 813 thousand
given as collateral to several entities. In Note 23. these
securities are reflected at nominal value.


The caption “Bonds and other securities issued by non
residents” at 31 December 2005 and 2004, includes bonds
issued by a company with head office in Luxembourg in
the   net   amount     of   €   71   192     thousand   and
€ 104 020 thousand, respectively. Losses recorded on
these bonds in 2005 amounted to € 32 828 thousand
(gains of 12 678 thousand in 2004). In 2004 provisions for
these bonds were used in the amount of € 62 684 thousand.
These bonds were sold in March 2006 for 102 000 000 US
Dollars (€ 86 463 thousand at the exchange rate in force
in 31 December 2005).




                                                         Notes to the Consolidated Financial Statements | Financial Assets at Fair Value through Profit or Loss   179
      8. Available-for-sale Financial
      Assets

      This heading comprises the following:

                                                                                                2005         2004

      Debt instruments

           Public debt                                                                        4 115 317    2 917 384

           Other public issuers                                                                538 325      536 011

           International financial organisations                                                15 157       19 969

           Other issuers                                                                      3 623 275    3 003 518

                                                                                              8 292 074    6 476 882

      Equity instruments

           Measured at fair value                                                             1 935 469    2 439 740
           Measured at historical cost                                                         199 007      615 729

                                                                                              2 134 476    3 055 469

                                                                                             10 426 550    9 532 351

      Other instruments                                                                        677 910      469 871

                                                                                             11 104 460   10 002 222



      The “Other instruments” heading at 31 December 2005
      and 2004 was made up as follows:



                                                                                                 2005         2004

      Mutual fund units:

           Investment funds                                                                    475 765      369 743

           Real estate funds                                                                   174 469       89 499

           Venture Capital Funds for Qualified Investors

           (“Fundos de Capital de Risco para Investidores Qualificados”)                        17 998              96
      Participation bonds                                                                          101        3 000

      Other                                                                                      9 577        7 533

                                                                                               677 910      469 871



      The “Other instruments” heading at 31 December 2005
      and 2004 included participating units in funds managed
      by Group entities in the amounts of €388,069 thousand
      and €380,917 thousand, respectively.




180   Notes to the Consolidated Financial Statements | Available-for-sale Financial Assets
The Equity instruments heading includes the following
investments:

                                                                                             2005
                                                                                          Investment
                                                                                         banking and                                 Participating
                                                        Banking     Insurance           venture capital                Total          interest (%)
Measured at fair value
  Portugal Telecom, SA                                   093
                                                        442            44 222                           -           486    315                 5.04
  EDP – Energias de Portugal, SA                         017
                                                        454             8 744                           -           462    761                 4.87
  Banco Comercial Português, SA                          920
                                                        159            21 662                                       181    582                 2.31
  PT Multimédia, SGPS, SA                                978
                                                         37               359                          -             38    337                 1.29
  Cimpor, SGPS, SA                                       200
                                                         37               687                          -             37    887                 1.21
  Euronext N.V.                                          003
                                                         19                 -                          -             19    003                 0.38
  Silger, SGPS, SA                                         -                -                  18    606             18    606                15.21
  Visabeira, SGPS, SA                                      -                -                  16    500             16    500                 4.00
  Finpro, SGPS, SA                                         -                -                  13    166             13    166                17.15
  Banif SGPS, SA                                           -           11 555                          -             11    555                 1.77
  Banco BPI, SA                                            -            7 823                          -              7    823                 0.27
  Teixeira Duarte - Engenharia e Construções, SA           -            5 499                          -              5    499                 0.98
  Foreign entities' shares                             2 453          601 528                          -            603    981
  Other                                                   78            9 418                  22    958             32    454
                                                   1 152 742          711 497                  71    230          1 935    469
Measured at historical cost
  Instituto Nacional de Habitação                    120      525           -                       -               120    525                52.49
  Fundo Margueira Capital                             47      438           -                       -                47    438                21.13
  CGD USA Holding Company Inc.                        21      192           -                       -                21    192                51.00
  Other                                                9      469           3                     380                 9    852
                                                     198      624           3                     380               199    007
                                                   1 351      366     711 500                  71 610             2 134    476

                                                                                               2004
                                                                                          Investment
                                                                                         banking and                                 Participating
                                                        Banking     Insurance           venture capital                Total          interest (%)
Measured at fair value
  EDP – Energias de Portugal, SA                         896
                                                        784            1 616                           -              786    512              9.70
  Portugal Telecom, SA                                   037
                                                        478           54 606                           -              532    643              4.95
  Unibanco e Unibanco Holdings                           608
                                                        416                -                           -              416    608             12.34
  Banco Comercial Português, SA                          960
                                                        159               21                           -              159    981              2.62
  PT Multimédia, SGPS, SA                                621
                                                         44                3                           -               44    624              1.28
  Vista Alegre Atlantis, SGPS, SA                        577
                                                          8                -                     3   126               11    703             16.62
  Euronext N.V.                                            -               6                     6   885                6    891              0.48
  Manuel Inácio & Filhos, SGPS, SA                         -               -                     7   500                7    500             16.80
  Foreign entities' shares                            10 272         438 130                           -              448    402
  Other                                                1 145          10 978                   12    753               24    876
                                                   1 904 116         505 360                   30    264            2 439    740
Measured at historical cost
  Império Bonança - Companhia de Seguros, SA                  -      361 895                        -                 361    895           100.00
  Instituto Nacional de Habitação                       120 525            -                        -                 120    525            52.00
  Fundo Margueira Capital                                47 438            -                        -                  47    438            51.00
  CGD USA Holding Company Inc.                           24 150            -                        -                  24    150            51.00
  Silger, SGPS, SA                                            -            -                   19 909                  19    909            15.21
  Finpro, SGPS, SA                                            -            -                    8 008                   8    008             4.80
  FIEP – Fundo para a Internacionalização
          das Empresas Portuguesas, SGPS, SA           5      420          -                        -                   5    420               8.50
  Other                                                2      586     11 759                   14 039                  28    384
                                                     200      119    373 654                   41 956                 615    729
                                                   2 104      235    879 014                   72 220               3 055    469




                                                                    Notes to the Consolidated Financial Statements | Available-for-sale Financial Assets   181
      The following criteria were used to prepare the above                                     - Securities held by the remaining entities were allocated to
      tables:                                                                                     “Banking activity”.


      - The “Insurance” column includes securities held by Caixa                                Available-for-sale financial assets at 31 December 2004
        Seguros and Garantia;                                                                   were measured in accordance with the criteria described in
                                                                                                Note 2.6. e). The principal securities originating the impact
      - The “Investment banking and venture capital” column                                     of applying IAS 39 at 1 January 2005 are as follows:
        includes the securities held by Caixa - Banco de
        Investimento and the Group’s venture capital area,
        including consolidated venture capital funds (Note 3.);


                                                                                                31/12/2004                Book
                                                                                                                         value at
                                                                                        Cost    Provisions     Net      01/01/2005    Impact       Impairment

      Equity instruments measured at fair value                                                                                      (Note 43.)

      Banking
      EDP - Energias de Portugal, SA                                                784 896             -    784 896    789 408          4 512              -
      Portugal Telecom, SGPS, SA                                                    478 037             -    478 037    470 531        (7 506)              -
      BCP - Banco Comercial Português, SA                                           439 013     (279 053)    159 960    159 960                -    (289 209)
      PT Multimédia, SGPS, SA                                                         47 780      (3 159)     44 621      33 913      (10 708)       (13 867)
      Eunonext N.V.                                                                     8 577           -      8 577       9 704         1 127              -

      Investment Banking and Venture Capital
      Finpro, SGPS, SA                                                                  8 008           -      8 008      16 998         8 989              -
      Manuel Inácio & Filhos, SGPS, SA                                                  7 500           -      7 500       4 159       (3 341)        (3 341)
      VAA – Vista Alegre Atlantis, SGPS, SA                                             8 152     (1 267)      6 885             -     (6 885)        (8 152)
      SAG Gest, SGPS, SA                                                                5 000       (668)      4 332       2 599       (1 733)        (2 401)
      Corporation Interamericana para el
        Financiamiento de Infraestructura                                               2 937           -      2 937       1 099       (1 838)        (1 838)
      Other                                                                           38 190      (1 103)     37 087      36 412         (294)              -

      Equity instruments measured at historical cost

      Banking
      CGD USA Holding Company Inc                                                     24 150            -     24 150      21 192       (2 958)        (2 958)
      Finangeste - Emp. Fin. de Gestão
                       e Desenvolvimento, SA                                            4 359       (144)      4 215       2 513       (1 702)        (1 846)
      Other                                                                                                                              (254)

      Debt instruments and other instruments

      Banking                                                                                                                              644

      Insurance                                                                                                                       138 860

      Sub-total                                                                                                                       116 913

      Part attributable to minority interest                                                                                               875

      Impact on equity excluding minority interest                                                                                    117 788




182   Notes to the Consolidated Financial Statements | Available-for-sale Financial Assets
Reversals, net of provisions recorded in 2004 in                 The final total amount of the units offered was US Dollars
accordance with Notice 4/2002 (Note 2.6. e)) totalled            758 147 491. The amount of the sale, net of charges and
€14 524 thousand, of which €14 719 thousand was                  expenses, was as follows:
recorded by corresponding credit to reserves and retained
earnings (Note 38.). The provisions for investments at           Amount of the sale (gross)                                                 617 252

31 December 2004, recorded in accordance with the                Fees and commissions                                                       (12 345)

transitory regime, correspond to application of the              Other                                                                        (1 586)

percentages established in Notice 4/2002, except for the         Total                                                                      603 321

investment in PT Multimédia SGPS, SA, where the                  Acquisition cost                                                         (419 398)

provision corresponds to the full amount to be provided          Capital gain (Note 32.)                                                    183 923

for.
                                                                 Income tax of €38 510 thousand on the capital gain was
The changes to the main equity instruments recorded as           withheld in Brazil.
“Available-for-sale financial assets” in 2005 and 2004
were as follows:                                                 Cimpor, SGPS, SA (Cimpor)
                                                                 On 30 December 2005 CGD acquired 8 000 000 Cimpor
Unibanco – União de Bancos Brasileiros                           shares at a cost of €37 200 thousand.
(“Unibanco”) and Unibanco Holdings
In September 2005 Caixa Brasil sold its investments in           Banco Comercial Português, SA (BCP)
Unibanco and Unibanco Holdings. For this purpose shares          In 2004, after obtaining permission from the Bank of Portugal,
held by Caixa Brasil were converted into 86 149 216 Units,       CGD recorded a provision of €622 133 thousand (Note 38.) to
comprising one preference share of Unibanco Holdings             cover the full amount of the unrealised loss not provided for
and one preference share of Unibanco.                            on BCP shares, based on the listed price of the shares at
                                                                 31 December 2003, by corresponding charge to free reserves
The sale was made in two tranches:                               and retained earnings. The provision was subsequently reversed
                                                                 by €10 156 thousand (Note 38.), as a result of change in the
1) Base offer (74 912 362 units);                                market value of BCP shares, by corresponding credit to retained
                                                                 earnings.
2) Green shoe offer corresponding to an option given to
   the banks coordinating the offer to acquire, within a         In July 2004 CGD sold 110 000 000 BCP shares for
   period of 30 days, a supplementary lot of 11 236 854 Units,   €192 500 thousand. As a result of this operation, CGD
   under the same conditions and price of the Units              recorded a loss of €2 200 thousand (Note 32.) and used
   initially offered in the base offer.                          provisions in the amount of €375 884 thousand (Note 38.).


The Public Sales Offer was registered on 14 September            In relation to the procedures used to prepare the statutory
2005.    The   Green     shoe    offer    was   exercised   on   accounts for 2004, upon adoption of IAS 39 on 1 January
20 September, financial settlement being completed on            2005 impairment of the shares held by Caixa at that date was
23 September 2005.                                               determined based on the listed price of BCP shares at
                                                                 31 December 2003.


                                                                 In      2005     CGD         sold      16,000,000            BCP       shares       for
                                                                 €36 800 thousand, recognising a gain of €8 443 thousand
                                                                 (Note 32.).




                                                                      Notes to the Consolidated Financial Statements | Available-for-sale Financial Assets   183
      EDP – Energias de Portugal, SA (EDP)
                                                                                                   an interim distribution of €36 000 thousand to its
      In 2004, after obtaining permission from the Bank of Portugal,                               shareholders, CGD having in 2004 received €3 060 thousand.
      Caixa recorded a provision of €141 863 thousand (Note 38.)
      by charge to retained earnings to cover the total unrealised loss                            As part of the liquidation process of FIEP the Fundo de Capital
      not provided for on its investment in EDP as at 31 December                                  de Risco para Investidores Qualificados API Capital – FIEP
      2003, calculated based on the stock exchange price at that                                   (“Fund”) was formed, its subscribed capital being paid up by
      date.                                                                                        FIEP shareholders in proportion to their participation in the
                                                                                                   capital of the company. CGD subscribed for 5,100 participation
      The following operations between the State, through the                                      units for the amount of €5 100 thousand, becoming holder of
      Directorate General for the Treasury (DGT), Parpública –                                     an 8.5% participation in the Fund.
      Participações do Estado, SGPS, SA (Parpública) and CGD, were
      carried out under the fifth re-privatisation phase of EDP’s                                  Following valuation of portfolio at the end of first half year,
      capital:                                                                                     which resulted in excess liquidity, the Fund’s capital was
                                                                                                   reduced by €1 400 thousand through the extinction of
      - CGD        sold       to      Parpública          all     shares        held         for   participating   units.   In   this   process,   CGD     received
        €325 822 thousand, corresponding to 4.75% of EDP’s                                         €119 thousand.
        share capital. As a result of this operation provisions of
        €136 244 thousand were used (Note 38.) and the remaining                                   Visabeira SGPS, SA
        provisions in the amount of €27 962 thousand were credited                                 In December 2005 Caixa Capital - Sociedade de Capital de
        to retained earnings (Note 38.);                                                           Risco, SA (Caixa Capital) and Fundo de Capital de Risco para
                                                                                                   Investidores Qualificados Grupo CGD – Caixa Capital
      - Simultaneously Caixa acquired from DGT and Parpública,                                     participated in a capital increase in Visabeira, SGPS, SA, having
        respectively, 568,853,506 and 224,883,323 subscription                                     subscribed for 708,155 and 1,062,231 shares, respectively,
        rights in the capital increase, at the price of €0.0801 each,                              with a nominal value of €5 each at a price of €9.32 each.
        totalling €63 578 thousand;
                                                                                                   Fespect – Serviços de Consultoria, SA (Fespect)
      - CGD exercised its subscription rights in the capital increase,                             In October 2004 Caixa Capital acquired 21,250 shares in
        having acquired 174,622,102 shares for €321 318 thousand.                                  Fespect for €21 thousand. In addition, in December 2004 it
                                                                                                   participated a capital increase in that company, having
      In addition, in the capital increase carried out in 2004, CGD                                subscribed for 616 250 shares with a nominal value of
      received 179,372,198 shares corresponding to 4.91% of                                        €1 each, at a cost of €616 thousand.
      EDP’s share capital, valued at €2.23 each, totalling
      €400 000 thousand (Note 26.).                                                                In December 2005 Caixa Capital sold its investment in Fespect
                                                                                                   for €6 289 thousand, realising a gain of €5 652 thousand
      In 2005 CGD sold a block of 179,372,198 non-re-privatised                                    (Note 32.).
      shares to Parpública, for of €408 969 thousand, based on their
      closing listed price on 31 August 2005. In this operation Caixa
      realised a gain of €8 969 thousand (Note 32.).


      FIEP – Fundo para a Internacionalização das
      Empresas Portuguesas, SGPS, SA (FIEP)
      Under the terms of the December 2004 resolution to dissolve
      and liquidate FIEP, its Shareholder’s General Meeting approved




184   Notes to the Consolidated Financial Statements | Available-for-sale Financial Assets
9. Unit-linked Products

The “Unit-linked investments” correspond to assets
managed by the Group’s insurance companies whose risk
is borne by the policyholders. Therefore these assets are
measured at fair value, the liability to the policyholders
being reflected in the heading “Liability to subscribers of
unit-linked products”. Investments recorded in this heading
at 31 December 2005 and 2004 comprise the following:


                                               2005    2004

Debt instruments                            464 164   22 028

Equity instruments                            5 628    5 379

Other instruments                            12 690     781

Derivatives                                   1 468        -

Loans and advances to credit institutions   185 312    2 713

                                            669 222   30 901



Liability to subscribers

    of unit-linked products                 669 222   31 098




10. Derivatives

Caixa carries out derivative operations in the normal course
of its business to meet the specific needs of its customers
and in order to hedge its exposure to foreign exchange,
interest rate and stock market fluctuations.


Caixa controls the risk of its derivatives operations through
operation approval procedures, definition of exposure limits
by product and counterparty and by monitoring the daily
evolution of the respective results.




                                                                Notes to the Consolidated Financial Statements | Unit-linked Products and Derivatives   185
      At 31 December 2005 and 2004 these operations were
      valued in accordance with the criteria referred to in Notes
      2.6. c) and e). The notional and book values of these
      operations on the above mentioned dates were as follows:

                                                                                                            2005
                                                                         Notional value                                     Book value
                                                                                                      Assets         Liabilities
                                                        Trading            Hedging                    held for       held for        Hedging derivatives
                                                      derivatives derivatives             Total       trading         trading        Assets     Liabilities    Total

                                                                                                      (Note 7.)
      Forward foreign exchange transactions
       Foreign exchange                                                                                  8 961          (14)             -            -         8 947
         Purchase                                        301 178                 -     301 178
         Sale                                            438 688                 -     438 688
      FRA (forward rate agreements)                         5 800                -         5 800               -        (36)             -            -           (36)
      Swaps
       Currency swaps                                                                                   85 713      (11 144)             -            -        74 569
         Purchase                                     4 239 790                  -   4 239 790
         Sale                                         4 168 106                  -   4 168 106


       Interest rate swaps and cross currency
       interest rate swaps                                                                             239 830     (304 631)       199 186    (414 529)    (280 144)
         Purchase                                    25 188 508           5 157 029 30 345 537
         Sale                                        24 914 115           5 121 311 30 035 426


       Loan Swaps                                                                                           39          (77)             -            -           (38)
         Purchase                                         67 126                 -        67 126
         Sale                                             67 126                 -        67 126


      Futures
       Interest rate                                                                                       185          (46)             -            -           139
         Long positions                                   10 872                 -        10 872
         Spot positions                               1 632 377                  -   1 632 377
       Shares and indexes                                                                                      -           -             -            -              -
         Traded on behalf of customers
           Spot positions                                 15 433                 -        15 433
         Other
           Long positions                                   6 547                -         6 547
           Spot positions                                   7 111                -         7 111


      Options
       Currency                                                                                          2 264       (1 209)             -            -         1 055
         Purchase                                        294 450                 -     294 450
         Sale                                            165 846                 -     165 846


       Shares and indexes                                                                               14 148      (34 090)             -            -       (19 942)
         Purchase                                        158 087                 -     158 087
         Sale                                            164 435                 -     164 435


       Interest rate (Caps & Floors)                                                                       844         (410)             -            -           434
         Purchase                                        334 010                 -     334 010
         Sale                                            592 560                 -     592 560


      Other                                                          -           -                -            -     (1 291)             -            -        (1 291)


                                                     62 772 165 10 278 340 73 050 505                  351 984     (352 948)       199 186    (414 529)    (216 307)




186   Notes to the Consolidated Financial Statements | Derivatives
                                                                                            2004
                                                         Notional value                                    Book value
                                                                                      Assets       Liabilities
                                              Trading      Hedging                    held for     held for            Hedging derivatives
                                            derivatives derivatives       Total       trading       trading            Assets        Liabilities     Total
                                                                                      (Note 7.)
Forward foreign exchange operations
   Foreign exchange                                                                    15 233                -                -               -      15 233
          Purchases                            95 966             -         95 966
          Sales                               335 118             -        335 118

FRA (forward rate agreements)                   5 800             -          5 800           -            (27)                -               -          (27)
Swaps
   Currency swaps                                                                            -               -         26 243        (20 645)         5 598
          Purchases                          3 065 429      920 769       3 986 198
          Sales                              3 216 646      920 899       4 137 545

   Interest rate swaps and cross currency
   interest rate swaps                                                                333 216      (502 020)          120 077       (297 886)      (346 613)
          Purchases                         16 050 622    5 893 248   21 943 870
          Sales                             16 050 818    6 015 837   22 066 655

Futures
   Interest rate                                                                             -               -                -               -             -
          Long position                        18 305             -         18 305
          Spot position                      1 579 680            -       1 579 680

          Other
           Long position                             -            -               -
           Spot position                        2 287             -          2 287

Options
   Currency                                                                               709           (126)                 -               -          583
          Purchases                           115 240             -        115 240
          Sales                                96 375             -         96 375

   Shares and indexes                                                                  11 185        (26 502)                 -               -     (15 317)
          Purchases                           159 018             -        159 018
          Sales                               161 223             -        161 223

   Interest rate (Caps & Floors)                                                        1 296         (1 281)                 -               -           15
          Purchases                           684 487             -        684 487
          Sales                               353 942             -        353 942

Other                                                -            -               -          -               -                -               -             -

                                            41 990 956   13 750 753   55 741 709      361 639      (529 956)          146 320      (318 531)      (340 528)




                                                                                                   Notes to the Consolidated Financial Statements | Derivatives   187
      The Group’s derivative transactions at 31 December 2005
      and 2004, by residual terms to maturity, are as follows:

                                                                                                     2005
                                                                                   > 3 months > 6 months     > 1 year
                                                                     <= 3 months   <= 6 months <= 1 year    <= 5 years      > 5 years       Total

      Forward foreign exchange transactions
          Foreign exchange
            Purchase                                                   293 924        3 836       3 418                 -           -     301 178
            Sale                                                       431 723        3 760       3 205                 -           -     438 688

      FRA (forward rate agreements)                                          -             -           -        5 800               -        5 800

      Swaps
          Currency swaps
            Purchase                                                   374 861        2 951    3 051 140      810 838               -    4 239 790
            Sale                                                       368 523        2 901    2 999 553      797 129               -    4 168 106


          Interest rate swaps and
          cross currency interest rate swaps
            Purchase                                                 4 353 443     2 678 849   4 626 932    13 942 313      4 744 000   30 345 537
            Sale                                                     4 308 953     2 651 473   4 579 648    13 799 832      4 695 520   30 035 426


          Loan swaps
            Purchase                                                         -             -           -       67 126               -      67 126
            Sale                                                             -             -           -       67 126               -      67 126

      Futures
          Interest rate
               Long positions                                           10 872             -           -                -           -      10 872
               Spot positions                                        1 279 377       36 000      86 000       231 000               -    1 632 377

          Shares and indexes
               Traded on behalf of customers                            15 433             -           -                -           -      15 433
               Other
                    Long positions                                       6 547             -           -                -           -        6 547
                    Spot positions                                       3 787        3 324            -                -           -        7 111

      Options (Currency and shares and indexes)
          Purchase                                                      30 000      113 820     238 307        64 049          6 361      452 537
          Sale                                                          45 000      111 461      88 361        85 459               -     330 281

      Caps & Floors
          Purchase                                                           -             -     10 000       252 560         71 450      334 010
          Sale                                                         100 000      105 000      45 000       342 560               -     592 560

                                                                                                                                        73 050 505




188   Notes to the Consolidated Financial Statements | Derivatives
                                                                              2004
                                                          > 3 months    > 6 months           > 1 year
                                            <= 3 months   <= 6 months    <= 1 year         <= 5 years         > 5 years             Total

Forward foreign exchange transactions
   Foreign exchange
        Purchase                               82 198        13 251          517                       -                  -          95 966
        Sale                                  282 188        41 009       11 921                       -                  -        335 118

FRA (forward rate agreements)                        -            -             -               5 800                     -            5 800
Swaps
   Currency swaps
        Purchase                             2 159 833    1 753 926       60 795              11 644                      -      3 986 198
        Sale                                 2 245 061    1 815 296       65 544              11 644                      -      4 137 545

   Interest rate swaps and
   cross currency interest rate swaps
        Purchase                             2 076 044    1 906 861     1 370 807       11 059 087           5 531 071         21 943 870
        Sale                                 2 086 135    1 908 743     1 376 853       11 065 326           5 629 598         22 066 655

Futures
   Interest rate
        Long positions                         18 305             -             -                      -                  -          18 305
        Spot positions                       1 559 680            -             -             20 000                      -      1 579 680
   Shares and indexes                           2 287             -             -                      -                  -            2 287

Options (Currency and shares and indexes)
   Purchase                                    38 958        27 619       60 910             140 510               6 261           274 258
   Sale                                        21 818        38 867       36 736             160 177                      -        257 598

Caps & Floors                                 115 000        80 000       50 000             777 884              15 545         1 038 429

                                                                                                                               55 741 709




                                                                                    Notes to the Consolidated Financial Statements | Derivatives   189
      The Group’s derivative transactions at 31 December 2005,
      by type of counterparty, are as follows:

                                                                       Notional        Book
                                                                        value          value
      Forward foreign exchange transactions
        Foreign exchange
          Financial institutions                                       514 586         5 366
          Customers                                                    225 280         3 581
                                                                       739 866         8 947

      FRA (forward rate agreements)
          Financial institutions                                         5 800           (36)

      Swaps
        Currency swaps
          Financial institutions                                      8 407 896       74 569

        Interest rate swaps and cross currency interest rate swaps
          Financial institutions                                     59 729 277     (315 407)
          Customers                                                    651 686        35 263
                                                                     60 380 963     (280 144)

        Credit event swaps
          Financial institutions                                       134 252           (38)

      Futures
        Interest rate
          Financial institutions                                      1 643 249          139

        Shares and indexes
          Financial institutions                                        13 658                 -
          Customers                                                     15 433                 -
                                                                        29 091                 -

      Options (Shares and indexes)
          Financial institutions                                       780 835        (4 238)
          Customers                                                      1 983       (14 649)
                                                                       782 818       (18 887)

      Caps & Floors
          Financial institutions                                       610 494           (55)
          Customers                                                    316 076           489
                                                                       926 570           434

      Other
          Financial institutions                                                -     (1 291)

                                                                     73 050 505     (216 307)




190   Notes to the Consolidated Financial Statements | Derivatives
11. Loans and Advances to
Customers

This heading comprises the following:

                                                                                                   2005                        2004
Domestic and foreign loans
   Loans                                                                                      38 865 345                  34 751 995
   Current account loans                                                                       4 167 700                    4 800 156
   Other                                                                                       3 840 580                    4 478 281
   Property leasing operations                                                                    915 385                      865 805
   Discounts and other loans secured by bills                                                     772 413                      834 759
   Equipment leasing operations                                                                   526 245                      487 176
   Loans taken – factoring                                                                        396 984                      147 502
   Overdrafts                                                                                     268 904                      353 004
   Purchase operations with repurchase agreement                                                    28 274                      24 000
Adjustment to assets under hedging operations                                                        5 647                              -
                                                                                              49 787 477                  46 742 678
Accrued interest net of deferred income                                                           291 979                      211 741
Commissions relating to amortised cost                                                               3 077                              -
                                                                                              50 082 533                  46 954 419
Overdue loans and interest                                                                     1 254 717                    1 145 083
                                                                                              51 337 250                  48 099 502
Impairment/Provisions for credit granted (Note 38.)                                           (1 401 319)                 (1 210 737)
                                                                                              49 935 931                  46 888 765




The “Domestic and foreign – other loans” heading at
31 December 2005 and 2004 included €70 259 thousand
and €70 284 thousand, respectively, relating to mortgage
and personal loans granted by CGD to its employees.


Provisions for credit granted at 31 December 2004 were
calculated in compliance with the policies described in
Note 2.6. e).


The changes in impairment and provisions in 2005 and
2004 are presented in Note 38..




                                                           Notes to the Consolidated Financial Statements | Loans and Advances to Customers   191
      The “Loans” heading at 31 December 2005 and 2004
      includes mortgage loans and consumer finance ceded by
      Caixa in securitisation operations, which were recorded in
      the balance sheet due to consolidation of the special
      purpose entities (SPE) created for those operations. The
      changes in those loans in 2005 and 2004 were as follows:

                                                                                         Consumer    Mortgage        Total
      Balances at 31 December 2003                                                        362 545     986 997    1 349 542
      Acquisition of new loans                                                            204 139            -    204 139
      Payments                                                                           (201 597)    (88 123)   (289 720)
      Write-offs                                                                             (415)           -       (415)
      Other                                                                                      -        287         287
      Balances at 31 December 2004                                                        364 672     899 161    1 263 833
      Acquisition of new loans                                                            205 280            -    205 280
      Payments                                                                           (203 479)    (91 084)   (294 563)
      Write-offs                                                                             (951)           -       (951)
      Other                                                                                    (5)       (120)       (125)


      Balances at 31 December 2005                                                        365 517     807 957    1 173 474




      These loans serve as collateral for the securities issued by
      the SPEs in these operations, which amounted to
      €1 216 589 thousand and €1 308 252 thousand,
      respectively, at 31 December 2005 and 2004 (Note 22.).


      At 31 December 2005 and 2004 the aging of “Overdue
      loans and interest”, was as follows:


                                                          2005                2004

      Up to three months                                135 400              77 820

      Three to six months                                49 938              37 732
      Six months to one year                            191 462             162 184

      One to three years                                353 640             395 541

      Over three years                                  524 277             471 806

                                                     1 254 717           1 145 083



      On 31 December 2005 principal not yet due on loans with
      instalments more than 90 days overdue amounted to
      €605 902 thousand.




192   Notes to the Consolidated Financial Statements | Loans and Advances to Customers
Loans and advances to customers at 31 December 2005
and 2004, by business activity, are made up as follows:

                                                                                                                2005
                                                           Central and local government
                                                               and State companies                 Companies and individuals                                Total
                                                            Loans        Overdue                  Loans       Overdue                        Loans        Overdue
                                                           not due        loans        Total     not due        loans          Total        not due         loans        Total
Companies
Agriculture, cattle breeding, hunting and forestry                   3        -            3     226 315       15 565        241 880        226 318        15 565      241 883
Fishing                                                              -        -            -      29 671          319         29 990         29 671           319       29 990
Mining industries
    Energy products                                                  -        -            -      44 519          451         44 970         44 519           451       44 970
    Mining industries except for energy products                     -        -            -      92 948        2 496         95 444         92 948         2 496       95 444
Manufacturing industries
    Food, beverages and tobacco                                  168         2          170      423 266        6 301        429 567        423 434         6 303      429 737
    Textiles                                                  10 524          -      10 524      278 332       27 085        305 417        288 856        27 085      315 941
    Leather and by-products                                          -        -            -      37 043        4 264         41 307         37 043         4 264       41 307
    Wood and cork                                                    -        -            -     159 413       11 486        170 899        159 413        11 486      170 899
    Pulp, paper, printing and publishing                         266          -         266      176 821        1 771        178 592        177 087         1 771      178 858
    Coal, oil products and nuclear fuel                             21        -           21      17 220             -        17 220         17 241              -      17 241
    Chemical products and synthetic or artificial fibres             7        -            7     104 888        1 062        105 950        104 895         1 062      105 957
    Rubber and plastic goods                                         -        -            -      98 834        1 130         99 964         98 834         1 130       99 964
    Non-metalic mineral products                                     -        -            -     324 163        4 918        329 081        324 163         4 918      329 081
    Basic metallurgy industries and metallic products          1 206          -       1 206      242 086        5 992        248 078        243 292         5 992      249 284
    Machinery and equipment                                          1        -           1      101 711        4 400        106 111        101 712         4 400      106 112
    Electrical and optical equipment                                 -        -            -      62 724          305         63 029         62 724           305       63 029
    Transport equipment                                       10 000          -      10 000      189 368        1 045        190 413        199 368         1 045      200 413
    Miscellaneous manufacturing industries                           -        -            -     455 326       14 345        469 671        455 326        14 345      469 671
Electricity, water and gas                                    18 236          -      18 236      644 883          311        645 194        663 119           311      663 430
Building                                                   1 342 604     11 943    1 354 547    3 404 984      75 116      3 480 100      4 747 588        87 059    4 834 647
Wholesale/retail trade and repair of cars,
motorcycles and personal and domestic goods                         39      23            62    2 009 754      60 449      2 070 203      2 009 793        60 472    2 070 265
Restaurants and hotels                                           280          -         280      390 541       50 425        440 966        390 821        50 425      441 246
Transport, warehousing and communications                     38 767        58       38 825      787 073       10 020        797 093        825 840        10 078      835 918
Financial activities
    Financial intermediation excluding insurance
    and pension funds                                                -        -            -     572 819       21 369        594 188        572 819        21 369      594 188
    Insurance, pension funds and
    supplementary social security activities                   3 514          -       3 514         4 911         158          5 069           8 425          158        8 583
    Other financial intermediation activities                        -        -            -      33 664            15        33 679         33 664            15       33 679
Real estate activities, rentals and services
provided to companies
    Real estate activities                                     1 173          -       1 173     2 076 267      36 907      2 113 174      2 077 440        36 907    2 114 347
    Other activities                                         189 921          -     189 921     3 032 806      77 211      3 110 017      3 222 727        77 211    3 299 938
Public administration, defence and mandatory
social security contributions                              1 452 248     12 946    1 465 194      32 886            37        32 923      1 485 134        12 983    1 498 117
Education                                                      1 330          -       1 330      110 325       10 512        120 837        111 655        10 512      122 167
Healthcare and welfare                                         3 146        90        3 236      201 277        5 464        206 741        204 423         5 554      209 977
Other activities and social and personal services             31 455      2 628      34 083      804 467       15 174        819 641        835 922        17 802      853 724
Families with domestic employees                                     -        -            -          332           12           344             332           12          344
International entities and other institutions                        -        -            -          197            5           202             197             5         202
                                                           3 104 909     27 690    3 132 599   17 171 834     466 120    17 637 954      20 276 743       493 810 20 770 553


Individuals
Housing                                                              -        -            -   27 999 646     669 950    28 669 596      27 999 646       669 950 28 669 596
Other                                                                -        -            -    1 806 144      90 957      1 897 101      1 806 144        90 957    1 897 101
                                                                     -        -            -   29 805 790     760 907    30 566 697      29 805 790       760 907 30 566 697


                                                           3 104 909     27 690    3 132 599   46 977 624 1 227 027      48 204 651      50 082 533    1 254 717 51 337 250




                                                                                                 Notes to the Consolidated Financial Statements | Loans and Advances to Customers   193
                                                                                                                      2004
                                                                 Central and local government
                                                                     and State companies                  Companies and individuals                          Total
                                                                  Loans        Overdue                   Loans      Overdue                     Loans      Overdue
                                                                 not due        loans        Total      not due      loans        Total        not due       loans       Total
      Companies
      Agriculture, cattle breeding, hunting and forestry              44           -           44      243 587      18 208      261 795       243 631      18 208     261 839
      Fishing                                                             -        -             -      30 965         750       31 715        30 965         750      31 715
      Mining industries
         Energy products                                                  -        -             -      23 701          44       23 745        23 701          44      23 745
         Minng industries except for energy products                 129           -          129       86 714       2 143       88 857        86 843       2 143      88 986
      Manufacturing industries
         Food, beverages and tobacco                                 181           -          181      416 304      10 219      426 523       416 485      10 219     426 704
         Textiles                                                 11 624         35        11 659      275 048      15 666      290 714       286 672      15 701     302 373
         Leather and by-products                                          -        -             -      38 412       3 644       42 056        38 412       3 644      42 056
         Wood and cork                                                    -        -             -     181 378       5 262      186 640       181 378       5 262     186 640
         Pulp, paper, printing and publishing                        301           -          301      321 450       3 680      325 130       321 751       3 680     325 431
         Coal, oil products and nuclear fuel                          19           -           19       76 768          51       76 819        76 787          51      76 838
         Chemical products and synthetic or artificial fibres             -        -             -     105 362         380      105 742       105 362         380     105 742
         Rubber and plastic goods                                         -        -             -      91 351       1 155       92 506        91 351       1 155      92 506
         Non-metalic mineral products                                     -        -             -     463 896       6 971      470 867       463 896       6 971     470 867
         Basic metallurgy industries and metallic products                -        -             -     210 509       3 702      214 211       210 509       3 702     214 211
         Non defined machinery and equipment                              -        -             -      94 742       4 292       99 034        94 742       4 292      99 034
         Electrical and optical equipment                                 -        -             -      69 553       1 316       70 869        69 553       1 316      70 869
         Transport equipment                                      17 069           -       17 069      157 644         870      158 514       174 713         870     175 583
         Miscellaneous manufacturing industries                           -        -             -     485 144      18 494      503 638       485 144      18 494     503 638
      Electricity, water and gas                                  34 347           -       34 347      458 329         969      459 298       492 676         969     493 645
      Building                                                  1 350 642     13 482     1 364 124    3 286 903     96 178     3 383 081     4 637 545    109 660    4 747 205
      Wholesale/retail trade and repair of cars,
      motorcycles and personal and domestic goods                    305           -          305     2 201 440     53 920     2 255 360     2 201 745     53 920    2 255 665
      Restaurants and hotels                                         196           -          196      429 392      18 426      447 818       429 588      18 426     448 014
      Transport, warehousing and communications                   22 592         22        22 614      702 909       6 772      709 681       725 501       6 794     732 295
      Financial activities
         Financial intermediation excluding insurance
         and pension funds                                         4 354           -        4 354      460 352      36 551      496 903       464 706      36 551     501 257
         Insurance, pension funds
         and supplementary social security activities                     -        -             -        6 747         27         6 774         6 747         27       6 774
         Other financial intermediation activities                        -        -             -      70 371       1 963       72 334        70 371       1 963      72 334
      Real estate activities, rentals and services
      provided to companies
         Real estate activities                                       25           -           25     2 020 952     53 487     2 074 439     2 020 977     53 487    2 074 464
         Other activities                                        135 307        238       135 545     2 690 410     25 288     2 715 698     2 825 717     25 526    2 851 243
      Public administration, defence
      and mandatory social security contributions               1 310 079     12 561     1 322 640      34 314         637       34 951      1 344 393     13 198    1 357 591
      Education                                                    1 151           -        1 151      101 092      10 720      111 812       102 243      10 720     112 963
      Healthcare and welfare                                       2 953        100         3 053      187 941       4 994      192 935       190 894       5 094     195 988
      Other activities and social and personal services           20 534         68        20 602      751 312      34 869      786 181       771 846      34 937     806 783
      Families with domestic employees                                    -        -             -         448          98            546         448          98         546
      International entities and other institutes                         -        -             -         263         102            365         263         102         365
                                                                2 911 852     26 506     2 938 358   16 775 703    441 848    17 217 551    19 687 555    468 354 20 155 909


      Individuals
      Housing                                                             -        -             -   25 672 195    585 027    26 257 222    25 672 195    585 027 26 257 222
      Other                                                               -        -             -    1 594 669     91 702     1 686 371     1 594 669     91 702    1 686 371
                                                                          -        -             -   27 266 864    676 729    27 943 593    27 266 864    676 729 27 943 593


                                                                2 911 852     26 506     2 938 358   44 042 567   1 118 577   45 161 144    46 954 419   1 145 083 48 099 502




194   Notes to the Consolidated Financial Statements | Loans and Advances to Customers
12. Non-current Assets and
Liabilities Held for Sale

At 31 December 2005 and 2004, these headings
comprised the following:

                                                                                                                           2005                       2004

ASSETS

   Property and equipment                                                                                                 35 977                    27 985

   Subsidiaries – Nutricafés – Cafés e Restauração, SA                                                                    66 541                             -

                                                                                                                         102 518                    27 985

   Impairment of property and equipment (Note 38.)                                                                        (9 990)                   (9 179)

                                                                                                                          92 528                    18 806

LIABILITIES

   Subsidiaries – Nutricafés – Cafés e Restauração, SA                                                                      5 541                            -




The “Non-current assets and liabilities – subsidiaries”                The book values (without fair value adjustments) of the
headings at 31 December 2005 correspond to the total                   main asset and liabilities of Nutricafés are as follows:
amount of assets and liabilities of Nutricafés – Cafés e
Restauração, SA (Nutricafés), including goodwill arising on            Non-current assets held for sale
the acquisition of that company. These balances were                        Tangible and intangible assets                                            37 124
reflected in total in this heading in accordance with IFRS 5,               Inventories                                                                2 700
since this subsidiary has been acquired with the purpose of                 Customers                                                                  5 109
sale, and the Group believed that the company would be                      Cash                                                                          224
sold in 2006. In fact, the sale of the investment in                        Other assets                                                               1 533
Nutricafés was agreed in March 2006 for an amount                                                                                                     46 690
between €67 000 thousand and €71 000 thousand, less                         Goodwill (in relation to book value)                                      19 851

the company’s net interest-bearing debt.                                                                                                              66 541

                                                                       Non-current liabilities held for sale

                                                                            Trade and other third party liabilities                                   (2 948)
                                                                            Other liabilities                                                         (2 593)

                                                                                                                                                     (5 541)



                                                                            Acquisition cost (Note 3.)                                                61 000




                                                                Notes to the Consolidated Financial Statements | Non-current Assets and Liabilities Held for Sale   195
      13. Investment Property

      The changes in the heading “Investment property” in 2005
      and 2004 were as follows:

      Balances at 31 December 2003                                           244 550

      Transition to IFRS

          Adjustments (Note 43.)                                               3 294

          Reclassification of premises for own use                             1 958

      Acquisitions                                                             1 399

      Revaluations                                                            (1 036)

      Sales                                                                   (3 902)

      Transfers and adjustments                                                  858

      Exchange differences                                                         7

      Balances at 31 December 2004                                           247 128

      Acquisition of subsidiaries:

          Império Bonança                                                     79 725

      Acquisitions                                                             6 996

      Revaluations                                                               372

      Sales                                                                  (15 105)

      Transfers and adjustments                                               (7 631)

      Exchange differences                                                         2



      Balances at 31 December 2005                                           311 487



      The “Transfers and adjustments” heading at 31 December
      2005 and 2004 includes negative amounts totalling
      €8 286 thousand and €7 813 thousand, relating to net
      revaluations of investment properties reclassified to specific
      insurance activity headings.




196   Notes to the Consolidated Financial Statements | Investment Property
Notes to the Consolidated Financial Statements   197
      14. Other Tangible Assets

      The changes in this heading in 2005 and 2004 were as
      follows:


                                                                       Balance at 31.12.2004
                                                                                    Accumulated
                                                                                    depreciation
                                                                     Gross         and impairment   Acquisition of                         Exchange
                                                                 book value            losses        subsidiaries          Additions       differences


      Premises for own use
          Land                                                    113 137                       -      10 087                     641           35
          Buildings                                               902 290            (265 700)         36 493               17 696           1 744
      Leasehold improvements                                        69 828            (41 773)                -              1 678            (308)
      Equipment                                                                -
          Fittings and office equipment                             90 827            (72 881)           1 338               5 913             (22)
          Machinery and tools                                       35 302            (26 203)             536               2 245              (3)
          Computer equipment                                      176 585            (166 284)           (105)              17 033             (68)
          Indoor facilities                                       263 186            (207 709)           2 425               9 278             (20)
          Transport material                                        11 552             (7 665)              17               2 059             (34)
          Safety/security equipment                                 24 124            (18 171)                -                   866          (13)
          Other equipment                                           24 128            (15 205)             395               3 248             (16)
      Assets under finance lease                                    52 611            (20 046)              12               9 182              10
      Other tangible assets                                         14 730             (8 627)               6                    155            5
      Tangible assets in progress                                   32 966                      -          262              20 739             169
                                                               1 811 266             (850 264)         51 466               90 733           1 479




                                                                     Balance as at 31.12.2003
                                                                    Gross          Accumulated              Transition to IFRS
                                                                book value          depreciation    Adjustments        Reclassifications   Additions
                                                                                                     (Note 43.)
      Premises for own use
          Land                                                    126 222                       -             -             (8 873)            159
          Buildings                                               906 641            (253 761)         (4 502)              (9 169)          4 051
      Leasehold improvements                                        66 397            (39 882)           (174)                       -         578
      Other premises                                                 1 811               (925)                -                  (886)         916
      Equipment
          Fittings and office equipment                             90 597            (72 716)                -                      -       7 335
          Machinery and tools                                       44 753            (35 947)                -                      -       4 370
          Computer equipment                                      204 459            (183 243)              20                       -       8 937
          Indoor facilities                                       264 953            (209 319)                -                  (261)       6 425
          Transport material                                        12 309             (8 573)                -                      -       2 026
          Safety/security equipment                                 45 569            (38 002)                -                      -       1 202
          Other equipment                                           24 464            (17 732)                -                      -       2 215
      Assets under finance lease                                    42 927            (15 917)                -                      -      22 029
      Other tangible assets                                         14 486             (8 102)         (2 807)                       -         492
      Tangible assets in progress                                   57 066                      -        (653)                       -      40 198
                                                               1 902 654             (884 119)         (8 116)            (19 189)         100 933




      Notes to the Consolidated Financial Statements | Other Tangible Assets
198
   2005


                Other
               transfers                     Impairment               Sales and               Net book
                 and        Depreciation    losses reversed           write offs               value at
Transfers     adjustments    for the year     in the year                 net                 31.12.2005




   2 283        (1 154)                -               -                 (6 114)                118 915
 (1 611)        (3 919)       (17 623)             828                 (15 445)                 654 753
   5 245          4 136        (5 659)                 -                    (317)                32 830


     295        (1 805)        (6 500)                 -                       17                17 182
   (764)        (1 418)        (1 535)                 -                    (799)                  7 361
   3 455          4 500       (13 974)                 -                 (2 657)                 18 485
 11 596           2 317       (15 212)                 -                 (1 603)                 64 258
      78          (348)        (1 331)                 -                    (363)                  3 965
      (3)          (11)        (1 741)                 -                       (2)                 5 049
     661        (1 149)        (2 070)                 -                     340                 10 332
   (598)        (1 959)        (6 854)                 -                 (1 120)                 31 238
   (208)          (551)        (1 128)                 -                       (5)                 4 377
(20 429)        (8 278)                -               -                 (6 565)                 18 864
        -       (9 639)       (73 627)             828                 (34 633)                 987 609




   2004
                               Other                                 Impairment                Sales and            Net book
Exchange                    transfers and   Depreciation          losses reversed              write offs            value at
differences    Transfers    adjustments     for the year             in the year                   net             31.12.2004
                                                                     (Note 38.)


      99          1 694        (5 498)                 -                         -                  (666)             113 137
     124          7 768          7 818         (18 120)                      377                 (4 759)              636 468
     658          5 492           623           (4 815)                          -                  (822)               28 055
        -               -        (911)               (5)                         -                        -                     -


     140          1 112        (1 191)          (7 275)                          -                    (56)              17 946
     107           (42)        (1 614)          (2 498)                          -                    (30)               9 099
     311          2 047          (110)         (10 861)                          -              (11 259)                10 301
      60          6 840        (1 605)         (11 217)                          -                  (399)               55 477
      69           533              30          (1 675)                          -                  (832)                3 887
      35             21             (2)         (1 881)                          -                  (989)                5 953
      15           (48)          2 732          (2 555)                          -                    (46)               9 045
      43        (5 468)          (394)          (9 562)                          -               (1 093)                32 565
       1             13          3 448          (1 410)                          -                    (18)               6 103
      37       (19 962)       (29 290)                 -                         -              (14 430)                32 966
   1 699                -     (25 964)         (71 874)                      377               (35 399)               961 002




                                                              Notes to the Consolidated Financial Statements | Other Tangible Assets   199
      On transition to IFRS the Group recorded a negative
      adjustment of €8 116 thousand to equity, of which
      €16 496 thousand relates to impairment of premises for
      own use recorded by Caixa (Note 43.). The impairment
      recorded at 31 December 2005 was €16 118 thousand.


      The column “Transition to IFRS – reclassifications” in 2004
      includes the following:


      Assets received as settlements of defaulting loans                                   17 189

      Investment property                                                                   1 862

      Other                                                                                     138

                                                                                           19 189




      15. Intangible Assets

      Changes in this heading in 2005 and 2004 were as follows:

                                                                                                         2005
                                                      Balance at 31.12.2004                                                                                                                                Net
                                                                    Accumulated      Acquisition of                          Net          Transfers and           Exchange        Amortisation          book value
                                                       Gross         amortisation      subsidiaries      Additions        disposals       adjustments         differences         for the year         at 31.12.2005

      Goodwill (Note 3.)                                       -               -        149 500                     -              -                   -              -                     -            149 500
      Value-in-force - Império Bonança (Note 3.)               -               -         46 386                     -              -                   -              -               (3 866)             42 520
      Computer software                              287 086          (201 603)          21 930           15 029           (12 239)               22 556            46               (47 053)             85 752
      Other intangible assets                          14 617          (13 084)                60           2 143           (3 304)                 654             (2)                 (556)                528
      Intangible assets in progress                    96 532                  -                   -      51 770                   -          (27 944)              (3)                     -            120 355
                                                     398 235          (214 687)         217 876           68 942          (15 543)            (4 734)               41               (51 475)            398 655

                                                                                                        2004
                                                   Balance as at 31.12.2003                                                                                                                                  Net
                                                               Accumulated         Acquisition of Transition                            Net         Transfers and         Exchange     Amortisation       book value
                                                    Gross      amortisation         subsidiaries       of IFRS          Additions disposals          adjustments      differences       for the year     at 31.12.2004
                                                                                                       (Note 43.)
      Computer software                            157 875         (124 547)          49 065             4 480           17 511        (3 940)          22 193               64           (37 218)           85 483
      Other intangible assets                       47 838          (38 743)           1 643            (6 217)           1 806            95           (1 536)               -            (3 353)            1 533
      Intangible assets in progress                106 984                 -              99           (15 560)          32 109               -       (27 117)               17                  -           96 532
                                                   312 697         (163 290)         50 807            (17 297)         51 426         (3 845)         (6 460)               81          (40 571)          183 548




      The intangible assets in progress at 31 December 2005 and
      2004 refer essentially to costs incurred with the
      development of computer software, which had not yet
      started operating at those dates.




      Notes to the Consolidated Financial Statements | Intangible Assets
200
16. Investments in Associates

This heading includes the following:

                                                                                                2005                                           2004
                                                                                      Effective      Net book                         Effective     Net book
                                                                                   investment (%)     value                        investment (%)    value

REN - Rede Eléctrica Nacional, SA                                                        20.00               184    791                       20.00           172   457
AdP - Águas de Portugal, SA                                                              20.37                95    626                       20.37            91   031
SIBS - Sociedade Interbancária de Serviços, SA                                           21.60                13    397                       21.60            14   046
Prado Cartolinas da Lousã, SA                                                            38.14                 2    768                       38.14             2   727
Prado Karton - Companhia de Cartão, SA                                                   38.14                 2    536                       38.14             2   629
SCI Imobiliária, SA                                                                      42.22                 2    064                           -                   -
Banco Internacional de São Tomé e Príncipe                                               27.00                 1    532                       27.00             1   204
Companhia de Papel do Prado, SA                                                          38.14                 1    235                       38.14             1   273
Other                                                                                                          4    317                                         3   112
                                                                                                             308    266                                       288   479


Financial data of the principal associated companies at
31 December 2005 and 2004 is as follows:

                                                                                                                           2005
                                                                              Registered                                                          Net          Total
     Business sector/Entity                                                     office        Assets         Liabilities     Equity     (a)     income        income

Banking

     Banco Internacional de São Tomé e Príncipe                               São Tomé       28 341             22 579           5 761                171        2 336

Property

     SCI Imobiliária                                                           Maputo            3 801            1 738          2 063            (117)               10

Other

     AdP - Águas de Portugal, SGPS, SA                                          Lisbon     3 924   132      3 320   366      470    624         13 446        578 749
     Companhia de Papel do Prado, SA                                            Tomar          4   693          1   455        3    238             (6)             0
     Prado - Cartolinas da Lousã, SA                                            Lousã         17   171          9   908        7    263          1 534         19 769
     Prado Karton - Companhia do Cartão, SA                                     Tomar         16   226          9   578        6    648            132         17 301
     REN - Rede Eléctrica Nacional, SA                                          Lisbon     2 973   662      2 049   858      923    804        109 970      3 147 159
     SIBS - Sociedade Interbancária de Serviços, SA                             Lisbon       128   623         66   898       61    725          5 097        113 701

(a) Equity includes net income for the year and excludes minority interest.


                                                                                                                           2004
                                                                              Registered                                                          Net          Total
     Business sector/Entity                                                     office        Assets         Liabilities     Equity     (a)     income        income

Banking

     Banco Internacional de São Tomé e Príncipe                               São Tomé        22 905             18 445          4 459                250         2 062

Specialised credit

     BCI ALD                                                                   Maputo         1 883               1 799            84               55             585
     Locarent - Companhia Portuguesa de Aluguer de Viaturas, Lda               Lisbon        34 379              32 994         1 385           (2 005)          1 959

Other

     AdP - Águas de Portugal, SGPS, SA                                          Lisbon     3 188   377      2 611    355     456   103          12 916   521        853
     Companhia de Papel do Prado, SA                                            Tomar          5   263          1    926       3   337              94              148
     Prado - Cartolinas da Lousã, SA                                            Lousã         16   321          9    174       7   147           1 490    18        102
     Prado Karton - Companhia do Cartão, SA                                     Tomar         16   765          9    875       6   890             379    16        920
     REN - Rede Eléctrica Nacional, SA                                          Lisbon     2 624   713      1 762    385     862   328          69 299 2 516        682
     SIBS - Sociedade Interbancária de Serviços, SA                             Lisbon       111   599         46    953      64   646          10 809   118        778

(a) Equity includes net income for the year and excludes minority interest.




                                                                                                 Notes to the Consolidated Financial Statements | Investments in Associates   201
      17. Income Tax

      Current tax assets and liabilities at 31 December 2005 and
      2004 are made up as follows:

                                                                                                                               2005                                      2004


      Current tax assets

          Income tax receivable                                                                                                7 142                                   75 288

          Other                                                                                                                3 471                                      121

                                                                                                                             10 613                                    75 409


      Current tax liabilities

          Income tax payable                                                                                              (105 678)                                    (7 395)

          Other                                                                                                                       (6)                                     -

                                                                                                                          (105 684)                                   (7 395)


      Deferred tax assets                                                                                                  436 869                                    365 339

      Deferred tax liabilities                                                                                             (97 675)                                   (43 290)

                                                                                                                           339 194                                    322 049




      The changes in deferred tax in 2005 and 2004 were as
      follows:

                                                                                                              2005
                                                                                                                  Changes in                Transfer
                                                                    Balance at Acquisition of Transition                  Profit or         to current                Balance at
                                                                    31.12.2004   subsidiaries    to IAS 39   Equity         loss               tax        Other       31.12.2005
                                                                                                (Note 43.)
      Impairment of and adjustments to property and
      tangible and intangible assets                                 11 211               -              -            -        (648)           2 067      (1 359)        11 271
      Provisions and impairment temporarily
      not tax deductible                                             88 929         16 165        15 422              -     40 977            33 268      (1 438)       193 323
      Measurement of derivatives                                     20 683               -       (3 163)             -     20 206             3 329         962         42 017
      Measurement of available-for-sale assets                             -              -       (3 821)    (43 244)                 -              -            -     (47 065)
      Measurement of securities                                      48 564         12 721       (36 386)             -        (909)           6 998      (2 192)        28 796
      Tax loss carry forwards                                        38 409         28 985               -            -    (47 508)                  -       215         20 101
      Employee benefits                                             142 297             606              -            -     (2 754)          (20 615)    (10 871)       108 663
      Charges                                                         3 240               -       21 443              -     (3 118)                  -      (114)        21 451
      Legal revaluation of other tangible assets                     (9 633)              -              -            -       1 065                  -       215         (8 353)
      Other                                                         (21 651)             10         2 050       (471)       (1 696)                  -    (9 252)       (31 010)
                                                                    322 049         58 487        (4 455)    (43 715)         5 615           25 047     (23 834)       339 194




      Notes to the Consolidated Financial Statements | Income Tax
202
                                                                                          2004
                                                                                      Changes in
                                                       Balance at Transition                      Profit or                    Balance at
                                                       31.12.2003    to IFRS     Equity              loss         Other        31.12.2004
                                                                    (Note 43.)
Impairment of and adjustments to property and
tangible and intangible assets                              -         9 871               -         1 105             235          11 211
Provisions and impairment temporarily
not tax deductible                                          -        31 818      64 148          (10 875)          3 838           88 929
Measurement of securities and derivatives                   -        43 501      (4 519)          30 247               18          69 247
Tax loss carry forwards                                     -        27 201               -       10 509              699          38 409
Employee benefits                                           -       185 109               -      (51 792)          8 980         142 297
Charges                                                     -         2 837               -           403                 -         3 240
Legal revaluation of other tangible assets                  -       (10 762)              -         1 129                 -        (9 633)
Other                                                       -        (4 876)              -          (516)      (16 259)         (21 651)
                                                            -       284 699      59 629          (19 790)        (2 489)         322 049




Income tax cost for the year, as well as the tax burden
measured by the ratio of income tax to pre-tax income are
as follows:

                                                                                                     2005                          2004



Current tax

   For the year                                                                                   134 140                          24 554

   Prior year adjustments (net)                                                                     (9 530)                        (3 184)

                                                                                                  124 610                          21 370



Deferred tax                                                                                       (5 615)                         19 790


Total income tax                                                                                  118 995                          41 160



Consolidated income before tax and minority interest                                              673 778                        269 147



Tax charge                                                                                        17.66%                          15.29%



The heading “Prior year adjustments” in 2005 includes a
gain of €10 829 thousand relating to amounts received by
Caixa under claims regarding additional income tax
assessments for 1998 and 2002.




                                                                                   Notes to the Consolidated Financial Statements | Income Tax   203
      Reconciliation between the nominal rate and effective tax
      rate in 2005 is as follows:

                                                                                                                  Rate                     Tax

      Income before income tax and minority interest                                                                                    673 778

      Tax at the nominal rate                                                                                    27.12%                 182 729
      Impact of companies with tax rates different from the nominal rate                                         (0.84%)                  (5 672)
      Impact of capital gain on the sale of Unibanco                                                             (1.39%)                  (9 393)
      Madeira Offshore Financial Branch (Note 2.13.)                                                             (0.36%)                  (2 427)
      Investments recorded in accordance with the equity method                                                  (0.34%)                  (2 260)
      Definitive differences to be deducted:
          Dividends from available-for-sale equity instruments                                                   (2.75%)                (18 497)
          Tax loss of the corporate groupings                                                                    (0.38%)                  (2 561)
          Other                                                                                                  (1.10%)                  (7 381)
      Definitive differences to be added:
          Non tax deductible provisions                                                                          (0.09%)                    (620)
          Other                                                                                                    1.09%                   7 367
      Tax benefits
          New job creation                                                                                       (0.41%)                  (2 771)
          Dividends from privatised shares                                                                       (0.37%)                  (2 522)
          Other                                                                                                  (0.29%)                  (1 938)
      Autonomous taxation                                                                                          0.16%                   1 100
      Other                                                                                                      (0.98%)                  (6 624)
                                                                                                                 19.08%                 128 529

      Tax adjustments relating to prior years
      Tax repayment relating to 1998 and 2002                                                                    (1.61%)                (10 829)
      Other                                                                                                        0.19%                   1 294
                                                                                                                 (1.42%)                 (9 535)
                                                                                                                 17.66%                 118 995




      In 2005 and 2004 CGD’s nominal tax rate considering the                      The tax authorities may normally review the tax situation
      municipal surcharge (derrama) applicable to its operations                   during a defined period, which in Portugal is four years (six
      was 27.12% and 27.20%, respectively.                                         years for the years reporting tax losses). This review can
                                                                                   result in possible corrections to taxable income of prior
      The Group does not recognise deferred tax assets when                        years (2002 to 2005, in the case of companies based in
      the existence of future taxable income is not probable and                   Portugal), as a result of different interpretations of the law.
      in other circumstances where its future utilisation is                       Given the nature of the possible corrections that may be
      uncertain. In the financial statements as at 31 December                     made, they cannot be quantified at present. However,
      2005 and 2004, Caixa did not recognise deferred tax                          Caixa’s Board of Directors believes that any corrections
      assets of approximately €156 000 thousand relating to a                      relating to the above years will not have a significant effect
      deduction for negative equity changes reflected in the                       on the consolidated financial statements.
      income tax return for 2004, since it is still waiting for an
      answer from the tax authorities to a request made
      regarding deductibility of that amount.                       The negative
      equity changes relate mainly to the impact on equity of
      the transfer of liabilities to Caixa Geral de Aposentações
      (Note 36.).




      Notes to the Consolidated Financial Statements | Income Tax
204
18. Insurance Contracts

18.1 Technical Provisions For Outwards
Reinsurance
This heading is made up as follows as at 31 December
2005 and 2004:

                                                                                                         2005                       2004

Caixa Seguros
    Life insurance
    Mathematical provision                                                                              3 606                      3 324
    Provision for claims
         Reported claims                                                                                7 298                      5 049
         Unreported claims (IBNR)                                                                       6 748                      1 755
                                                                                                       14 046                      6 804
    Total life insurance                                                                               17 652                     10 128


    Non-life insurance:
    Provision for unearned premiums                                                                    48 323                     31 029
    Provision for claims:
         Reported claims                                                                             153 543                      98 336
         Unreported claims (IBNR)                                                                       9 355                      6 192
                                                                                                     162 898                    104 528
    Other technical provisions
    Provision for ageing                                                                                   485                            -
    Total non-life insurance                                                                         211 706                    135 557
    Caixa Seguros sub-total                                                                          229 358                    145 685


Other                                                                                                   2 570                         690


                                                                                                     231 928                    146 375



The provision for unearned premiums for outwards
reinsurance at 31 December 2005 and 2004 is made up as
follows:

                                                                  2005                                               2004
                                                   Deferred      Deferred                         Deferred        Deferred
                                                   premiums       costs             Net          premiums            costs           Net

Labour accident                                             6             -               6                -               -                  -
Personal and passenger accident                          5 605       (78)          5 527            4 841             (101)         4 740
Health                                                   5 002            -        5 002                   -               -                  -
Fire and other damage                                30 923       (2 373)        28 550            21 327          (1 125)         20 202
Motor                                                    1 817            -        1 817                 33                -             33
Marine, air and transport                                5 038      (114)          4 924            1 646             (107)         1 539
General third party liability                            1 888       (49)          1 839            2 783              (48)         2 735
Credit and guarantees                                     588        (21)             567                76            (12)              64
Assistance                                                305             -           305                80                -             80
Miscellaneous                                                -      (214)           (214)           1 840             (204)         1 636
                                                     51 172      (2 849)         48 323            32 626         (1 597)          31 029




                                                                          Notes to the Consolidated Financial Statements | Insurance Contracts    205
      The provision for outwards reinsurance claims at
      31 December 2005 and 2004 is made up as follows:

                                                                                          2005                                2004
                                                                                          Not                                   Not
                                                                             Reported   Reported    Total    Reported        Reported     Total

      Life insurance                                                           7 298     6 748      14 046     5 049         1 755        6 804

      Non-life insurance:
        Labour accident                                                        2 729          38     2 767       590            35          625
        Personal and passenger accident                                        4 328         345     4 673     1 705            97        1 802
        Health                                                                    64          21        85         -             -            -
        Fire and other damage                                                 71 758     6   195    77 953    55 731         4 278       60 009
        Motor                                                                 24 648         530    25 178    10 175           690       10 865
        Marine, air and transport                                             17 318         655    17 973     4 564           293        4 857
        General third party liability                                         30 031     1   166    31 197    24 027           603       24 630
        Credit and guarantees                                                    422           8       430       584             5          589
        Legal protection                                                           -         213       213         -             -            -
        Miscellaneous                                                          2 245         184     2 429       960           191        1 151
                                                                             153 543     9   355   162 898    98 336         6 192      104 528
                                                                             160 841    16   103   176 944   103 385         7 947      111 332



      Changes in the technical provisions for outwards
      reinsurance for 2005 are summarised Note 18.2..


      18.2. Technical Provisions for
      Insurance Contracts
      This heading was made up as follows at 31 December
      2005 and 2004:

                                                                                                                 2005                    2004

      Caixa Seguros
         Direct insurance and inwards reinsurance
         Life insurance:
             Mathematical provision
                 Insurance contracts                                                                            238 714                 97 304
                 Investment contracts with discretionary profit sharing                                       4 217 141              2 660 162
                                                                                                              4 455 855              2 757 466
               Provision for profit sharing                                                                      39 798                 22 353
               Fund for future payments                                                                               -                 42 993
               Provision for claims:
                   Reported claims                                                                               46    339              84   963
                   Unreported claims (IBNR)                                                                      22    971              16   230
                                                                                                                 69    310             101   193
                    Total life insurance                                                                      4 564    963           2 924   005

          Non-life insurance:
             Provision for unearned premiums                                                                    398 223                 268 038
             Provision for claims:
                  Reported claims                                                                             1 908    464           1 023   628
                  Unreported claims (IBNR)                                                                      118    201              76   498
                                                                                                              2 026    665           1 100   126
               Provision for premium insufficiency                                                               13    410               9   593
               Other technical provisions
                   rovision for ageing                                                                              303                      -
                   Provision for profit sharing                                                                     253                    105
                   Provision for exceptionally large claims                                                           -                  4 122
                   Total non-life insurance                                                                   2 438 854              1 381 984

      Garantia                                                                                                    6 623                   4 383

                                                                                                              7 010 440              4 310 372




      Notes to the Consolidated Financial Statements | Insurance Contracts
206
The mathematical provision for life insurance and provision
for profit sharing in direct insurance and inwards
reinsurance at 31 December 2005 and 2004 are made up
as follows:

                                                                    2005                                                  2004
                                                                Provision for                                         Provision for
                                                 Mathematical       profit                     Mathematical               profit
                                                  provision        sharing           Total      provision                sharing            Total

Insurance contracts:

Rendas                                            133 920            266         134 186                    -             266               266
Grupo com Participação nos Resultados              33 030          2 692          35 722            33    386           3 522             36908
Grupo sem Participação nos Resultados              23 182              -          23 182            22    563               -             22563
Individual com Participação nos Resultados          8 521          5 342          13 863            10    465           4 155             14620
TAR Grupo Taxa Fixa                                10 612              -          10 612            10    612               -             10612
Rendas Individual 4%                               10 092            224          10 316             8    042             202              8244
Risco                                               3 781          6 145           9 926                    -           3 552              3552
Rendas Grupo 4%                                     6 348            102           6 450              5   681             102              5783
Capital Vida 4%                                     4 822            272           5 094              4   382             300              4682
Mistos                                              2 114              -           2 114                    -               -                 -
Individual sem Participação nos Resultados          2 005              -           2 005              2   038               -             2 038
Protecção Sénior                                      114              -             114                   42               -                42
Educação Garantida                                     91              -              91                   18               -                18
Seguro de Dependência                                  58              -              58                   45               -                45
Educação Segura 3,5%                                   24              -              24                   30               -                30
                                                  238 714         15 043         253 757            97    304          12 099           109 403

Investment contracts
with discretionary profit sharing

Capitalização/Universal Life/Operações de Cap.    801  341         2   186       803  527                   -            1 226            1     226
PPR/E Rend. 3.ªS 2,75%                            666  135         4   501       670  636         361     606            2 021          363     627
Seg Poupança 5.ªS 2,75%                           530  581         2   424       533  005         480     906           1 000           481     906
PPR/E Rendimento1.ª/2.ª S 3,5%                    415  878         1   899       417  777         464     149              715          464     864
PPR/E Fidelidade 4%                               232  582         2   725       235  307         239     712          (2 416)          237     296
Epargne Libre (FRF) 3                             190  487         1   987       192  474         155     125            1 925          157     050
Seg Poupança 6.ªS 2,25%                           188  473             433       188  906                   -                -                    -
Seg Poupança 3 / 4.ªS 3,5%                        133  745             600       134  345         126     001              161          126     162
F.Poupança 7.ªS 2%                                133  389             162       133  551                   -                -                    -
PPR/E Rend. 4.ª S 2,25%                           121  276               -       121  276                   -                -                    -
PIR 4%                                            106  908         5   478       112  386         134     819            2 740          137     559
Top Reforma 4% - Ind.                             109  132              41       109  173         120     911              260          121     171
PPR/E MC Série B 2,75%                             96  092             400        96  492          85     683              353           86     036
Seg Poupança 1.ªS 4%                               95  353               -        95  353          89     755               37           89     792
PPR (Clássico) 4%                                  80  078         1   337        81  415          87     982            1 646           89     628
PPR/E MC Série A 3%                                78  866               -        78  866          91     371                -           91     371
Valorização 2.ªS 4,1%                              40  086             283        40  369          39     687              195           39     882
Postal PPR/E Série B 2,75%                         33  466             123        33  589          29     338              137           29     475
Postal PPR/E Série A 3,25%                         30  327               -        30  327          29     681                -           29     681
Seg Poupança 2.ªS 2,75%                            20  972              99        21  071          23     096              184           23     280
Super Garantia 2,75% (Med)                         18  620               2        18  622          17     436                2           17     438
Multiplano PPR/E 3%                                18  594              10        18  604          23     899               10           23     909
Garantia Crescente 2,75% - Bco                     15  401               1        15  402          15     599                1           15     600
Postal Poup Invest 3,25%                           12  715               -        12  715          13     212                -           13     212
Postal Poup Futuro 3%                              12  596               -        12  596          11     327                -           11     327
PPR/E Investimento Garantido 1.ª Série              7  352               -         7  352                   -                -                    -
Top Reforma 2,75% Grupo                             6  629              27         6  656             6   449                3              6   452
Top Reforma 4% Grupo                                6  294               1         6  295             6   769               15              6   784
Complementos Reforma                                4  712              22         4  734             4   103               39              4   142
IB - Luxemburgo                                     3  163               -         3  163                   -                -                    -
Postal Poup Futuro Série B                          2  247               -         2  247                   -                -                    -
Postal Poupança Segura                              1  971               -         1  971                   -                -                    -
PPR/E Capital Garantido                             1  680              14         1  694                 146                -                  146
Top Poupança 6%                                          -               -              -           1     400                -            1     400
                                                 4 217 141        24   755      4 241 896       2 660     162          10 254         2 670     416
                                                 4 455 855        39   798      4 495 653       2 757     466          22 353         2 779     819




                                                                                 Notes to the Consolidated Financial Statements | Insurance Contracts   207
      Changes in the mathematical provision and provision for
      profit sharing in direct insurance and inwards reinsurance
      and mathematical provision for outwards reinsurance in
      2005 are as follows:

                                                                                                                      Liabilities
                                                                                             Acquisition/           originated in
                                                                              Opening          sale of                period and          Profit               Closing
                                                                              balance        subsidiaries           interest paid        sharing               balance

      Direct insurance and inwards reinsurance:
      Mathematical provision:
          - Insurance contracts                                                97 304              124 556              16 570                 284              238 714
          - Investment contracts with
            profit sharing having
            a discretionary component                                        2 660 162             816 969             727 261            12 749               4 217 141
                                                                             2 757 466             941 525             743 831            13 033               4 455 855
      Provision for profit sharing:
          - Insurance contracts                                                 8 282                3 818               6 499            (3 556)                15 043
          - Investment contracts with
            profit sharing having
            a discretionary component                                           14 071              23 072                 491           (12 879)                 24 755
                                                                                22 353              26 890               6 990           (16 435)                 39 798
                                                                             2 779 819             968 415             750 821            (3 402)              4 495 653

      Outwards reinsurance:
      Mathematical provision
         - Insurance contracts                                                  3 323                  11                  271                     -              3 605
         - Investment contracts with
           profit sharing having
           a discretionary component                                                1                    -                      -                  -                     1

                                                                                3 324                  11                  271                     -              3 606


      The provision for unearned premiums on direct insurance
      and inwards reinsurance at 31 December 2005 and 2004
      is made up as follows:

                                                                                                        2005                                       2004
                                                                                         Deferred     Deferred                      Deferred   Deferred
                                                                                     premiums           costs           Net         premiums       costs          Net

      Labour accident                                                                     20 331       (3 039)         17 292        11 596        (1 571)       10 025
      Personal and passenger accidents                                                    19 539       (2 947)         16 592        21 284        (2 191)       19 093
      Health                                                                              20 966       (2 925)         18 041         9 718        (1 944)        7 774
      Fire and other damage                                                               98 022      (16 088)         81 934        59 533        (9 663)       49 870
      Motor                                                                              279 047      (50 544)        228 503       198 729     (38 153)        160 576
      Marine, air and transport                                                            7 284         (846)          6 438         2 628            (480)      2 148
      General third party liability                                                       11 013       (1 924)          9 089         7 300        (1 312)        5 988
      Credit and guarantees                                                                 322              (63)         259           192             (38)        154
      Legal protection                                                                     5 185         (458)          4 727         1 739             (79)      1 660
      Assistance                                                                          13 512         (518)         12 994         9 702            (202)      9 500
      Miscellaneous                                                                        2 666         (312)          2 354         1 408            (158)      1 250
                                                                                         477 887      (79 664)        398 223       323 829     (55 791)        268 038




      Notes to the Consolidated Financial Statements | Insurance Contracts
208
Notes to the Consolidated Financial Statements | Insurance Contracts   209
      Changes in provisions for unearned premiums and deferred
      acquisition costs for direct insurance and inwards
      reinsurance and outwards reinsurance in 2005 are as
      follows:

                                                                                          Acquisition/     Liabilities
                                                                             Opening        sale of        originated     Exchange     Closing
                                                                             balance      subsidiaries   in the period   differences   balance

      Direct insurance and inwards reinsurance
          Provision for unearned premiums
              Labour accident                                                 11   596        8   847         (112)           -         20    331
              Personal and passenger accident                                 21   284        2   701       (4 450)           4         19    539
              Health                                                           9   718        9   138        2 110            -         20    966
              Fire and other damage                                           59   533       38   024           451          14         98    022
              Motor                                                          198   729       89   592       (9 274)           -        279    047
              Marine, air and transport                                        2   628        5   049         (393)           -          7    284
              General third party liability                                    7   300        6   126       (2 418)           5         11    013
              Credit and guarantees                                                192            234         (104)           -               322
              Legal protection                                                 1   739        2   864           582           -          5    185
              Assistance                                                       9   702        2   207        1 603            -         13    512
              Miscellaneous                                                    1   408        1   027          231            -          2    666
                                                                             323   829      165   809     (11 774)           23        477    887

          Deferred acquisition costs
             Labour accident                                                  (1  571)        (1 647)            179          -          (3 039)
             Personal and passenger accident                                  (2  191)          (541)          (215)          -         (2  947)
             Health                                                           (1  944)        (1 275)           294           -         (2  925)
             Fire and other damage                                            (9  663)        (7 374)            949          -        (16  088)
             Motor                                                           (38  153)      (17 653)          5 262           -        (50  544)
             Marine, air and transport                                           (480)          (948)            582          -            (846)
             General third party liability                                     (1 312)        (1 005)            393          -          (1 924)
             Credit and guarantees                                                 (38)           (45)            20          -              (63)
             Legal protection                                                      (79)         (489)           110           -            (458)
             Assistance                                                          (202)          (441)           125           -            (518)
             Miscellaneous                                                       (158)          (200)             46          -            (312)
                                                                             (55 791)       (31 618)          7 745           -        (79 664)
                                                                             268 038        134 191         (4 029)          23        398 223

      Outwards reinsurance:
         Provision for unearned premiums
             Labour accident                                                       -                -              6          -              6
             Personal and passenger accident                                   4 841                -           761           3          5 605
             Health                                                                -          6   158       (1 156)           -          5 002
             Fire and other damage                                            21 327         11   618       (2 027)           5         30 923
             Motor                                                                33          1   645           139           -          1 817
             Marine, air and transport                                         1 646          3   957         (565)           -          5 038
             General third party liability                                     2 783          1   121       (2 016)           -          1 888
             Credit and guarantees                                                76              138           374           -            588
             Legal protection                                                      -               21           (21)          -              -
             Assistance                                                           80                -           225           -            305
             Miscellaneous                                                     1 840              491       (2 331)           -              -
                                                                              32 626         25   149       (6 611)           8         51 172

          Deferred acquisition costs:
             Personal and passenger accident                                    (101)             -              23            -            (78)
             Fire and other damage                                            (1 125)             -         (1 248)            -        (2 373)
             Marine, air and transport                                          (107)             -              (7)           -          (114)
             General third party liability                                        (48)            -                 -        (1)            (49)
             Credit and guarantees                                                (12)            -               (9)          -            (21)
             Miscellaneous                                                      (204)             -             (11)          1           (214)
                                                                              (1 597)             -         (1 252)            -        (2 849)
                                                                              31 029         25 149         (7 863)            8        48 323




210   Notes to the Consolidated Financial Statements | Insurance Contracts
The provision for claims for direct insurance and inwards
reinsurance at 31 December 2005 and 2004 comprises the
following:

                                                                      2005                                              2004
                                                                      Not                                                Not
                                                      Reported      Reported          Total         Reported         Reported         Total

Life insurance:                                        46 339        22 971         69 310            84 963          16 230        101 193


Non-life insurance:
   Labour accident:
       Mathematical provision                         464 818        11 689        476 507          196 001            9 619        205 620
       Provision for lifelong assistance              111 716         1 805        113 521            72 917           1 601          74 518
       Provision for temporary assistance              61 511         5 545         67 056            35 997           2 165          38 162
                                                      638 045        19 039        657 084          304 915           13 385        318 300
   Other insurance:
       Personal and passenger accident                 15 816         1 694         17 510             8 922              396          9 318
       Health                                          14 378        20 721         35 099            11 953           9 880          21 833
       Fire and other damage                          140 173        11 626        151 799            79 858           6 900          86 758
       Motor                                          935 407        55 913        991 320          528 868           42 038        570 906
       Marine, air and transport                       32 830          875          33 705             7 379              376          7 755
       General third party liability                  116 398         7 355        123 753            71 394           3 152          74 546
       Credit and guarantees                                1 388       33            1 421            1 485                34         1 519
       Legal protection                                     4 233      207            4 440            2 416                 0         2 416
       Assistance                                           6 607      384            6 991            5 183                 2         5 185
       Miscellaneous                                        3 189      354            3 543            1 255              335          1 590
                                                     1 270 419       99 162     1 369 581           718 713           63 113        781 826
                                                     1 908 464      118 201     2 026 665        1 023 628            76 498 1 100 126
                                                     1 954 803      141 172     2 095 975        1 108 591            92 728 1 201 319




                                                                             Notes to the Consolidated Financial Statements | Insurance Contracts   211
      The changes in provisions for direct insurance and inwards
      reinsurance and outwards reinsurance claims in 2005 were
      as follows:

                                                                                         Acquisition/    Liabilities
                                                                              Opening      sale of       originated                    Exchange   Closing
                                                                               balance   subsidiaries   in the period     Claims       differences balance

      Direct insurance and inwards reinsurance:
          Provision for claims
          Life insurance                                                      101 193      17 465         839 963        (889 313)          2      69 310
          Non-life insurance:
               Labour accident                                                318 300     253 520         213 687        (128 423)          -     657 084
               Other insurance:
                    Personal and passenger accident                             9 318       4 555          13 625           (9 988)         -      17 510
                    Health                                                     21 833      10 795          98 296          (95 825)         -      35 099
                    Fire and other damage                                      86 758      68 387          83 541          (86 887)         -     151 799
                    Motor                                                     570 906     364 274         483 831         (427 691)         -     991 320
                    Marine, air and transport                                   7 755      21 217          17 570          (12 837)         -      33 705
                    General third party liability                              74 546      39 350          25 645          (15 788)         -     123 753
                    Credit and guarantees                                       1 519       1 461          (1 411)            (148)         -       1 421
                    Legal protection                                            2 416       1 666            1 123            (765)         -       4 440
                    Assistance                                                  5 185       1 218          22 382          (21 794)         -       6 991
                    Miscellaneous                                               1 590       2 482            3 105          (3 634)         -       3 543
                                                                              781 826     515 405         747 707        (675 357)          -   1 369 581
                                                                             1 100 126    768 925         961 394        (803 780)          -   2 026 665
                                                                             1 201 319    786 390       1 801 357       (1 693 093)         2   2 095 975
      Outwards reinsurance:
          Provision for claims
          Non-life insurance                                                    6 804         176          15 881           (8 815)         -      14 046
          Non-life insurance
               Labour accident:
                    Mathematical provision                                        625       1 462            1 774          (1 094)         -       2 767
               Other insurance:
                    Personal and passenger accident                             1 802         871            3 930          (1 930)         -       4 673
                    Health                                                           -      9 312              143          (9 370)         -          85
                    Fire and other damage                                      60 009      35 010          18 870          (35 936)         -      77 953
                    Motor                                                      10 865      14 649            5 437          (5 773)         -      25 178
                    Marine, air and transport                                   4 857      10 918          11 760           (9 562)         -      17 973
                    General third party liability                              24 630       1 677          13 214           (8 324)         -      31 197
                    Credit and guarantees                                         589         372            (482)             (49)         -         430
                    Legal protection                                                 -           -             212                 1        -         213
                    Miscellaneous                                               1 151       1 611            1 120          (1 453)         -       2 429
                                                                              103 903      74 420          54 204          (72 396)         -     160 131
                                                                              104 528      75 882          55 978          (73 490)         -     162 898
                                                                              111 332      76 058          71 859          (82 305)         -     176 944




      Notes to the Consolidated Financial Statements | Insurance Contracts
212
The changes in the provision for premium insufficiency for
direct insurance and inwards reinsurance in 2005 were as
follows:

                                                                       Acquisition/
                                                             Opening     sale of           Reversals in        Exchange Closing
                                                             balance   subsidiaries         the period        differences balance

Direct insurance and inwards reinsurance:
   Personal and passenger accident                               -            83                  145                    -           228
   Sickness                                                  4 844          311               (2 475)                    -        2 680
   Fire and other damage                                        76        2 703               (1 225)                   1         1 555
   Motor                                                     4 434          719                   189                    -        5 342
   Marine, air and transport                                    24          992                  (638)                   -           378
   General third party liability                               207          423                 1 518                    -        2 148
   Credit and guarantees                                         2            57                  (34)                   -            25
   Assistance                                                    6        1 120                  (377)                   -           749
   Miscellaneous                                                 -              -                 305                    -           305


                                                             9 593        6 408               (2 592)                   1       13 410




                                                                       Notes to the Consolidated Financial Statements | Insurance Contracts   213
      19. Other Assets

      This heading comprises the following:

                                                                                                            2005                   2004

      Other assets
          Assets received as settlement of defaulting loans                                                155 271                145 479
          Debt certificates of the Territory of Macao                                                      166 465                129 440
          Other                                                                                             19 604                 26 967
      Debtors and other applications
          Premiums receivable – Insurance                                                                  195 673                106 241
          Other debtors                                                                                    389 917                327 082
          Central and local government                                                                      11 794                  7 808
          Shareholders’ loans                                                                               32 161                 14 414
          Debtors - security operations                                                                     25 156                        -
          Debtors - futures contracts                                                                       28 357                  7 317
          Grants receivable from
               The State                                                                                    53 174                 58 280
               Other entities                                                                               24 396                 30 296
          Amount receivable from the sale of Barraqueiro                                                    27 925                 27 925
          Amount receivable from sale of assets received as settlement of defaulting loans                   4 258                  6 940
          Other                                                                                            434 180                391 696
      Liability for pensions and other benefits:
          Excess coverage of liabilities Caixa Seguros (Note 36.)                                            4 363                    100
          Actuarial gains and losses:
               CGD (Note 36.)                                                                              160 586                 68 852
               Caixa Seguros (Note 36.)                                                                      1 180                  5 246
               Other                                                                                        (1 912)                 7 862
      Income receivable                                                                                     20 825                 20 727
      Deferred costs
          Rent                                                                                               3 355                  2 213
          Underwriting cost on loan contracts                                                               28 127                        -
          Other                                                                                             23 696                 10 613
      Deferred income                                                                                       (3 319)                (4 108)
      Asset operations pending settlement                                                                  693 443                476 508
      Other                                                                                                    913                     36
                                                                                                         2 499 588              1 867 934

      Impairment
          Debtors and other applications                                                                  (169 817)             (109 583)
                                                                                                         2 329 771              1 758 351




      The changes in impairment of debtors and other                          granted. Impairment corresponds to the estimated losses
      applications in 2005 and 2004 are presented in Note 38..                on the sale of these assets (also considering the costs to be
                                                                              incurred up to the respective sale).
      The amounts recorded in the “Assets received as
      settlement of defaulting loans” heading correspond mainly               Under the terms of the contract to issue notes entered into
      to property and equipment received in payment of loans                  between Banco Nacional Ultramarino, SA (Macao) and the




      Notes to the Consolidated Financial Statements | Other Assets
214
Territory of Macao, the bank has undertaken to provide the           The amount receivable from the sale of Barraqueiro results
Territory with foreign currency corresponding to the                 from the sale by Caixa Desenvolvimento, in 2002, of its
countervalue of the notes in circulation, and in return,             investment in Barraqueiro, SGPS, SA. Under the terms of
receives a promissory note for an equivalent amount to cover         the contract signed on 27 June 2002 the sale price plus
the liability resulting from the currency issue (Note 25.).          supplementary capital contributions granted totalled
The amounts to be provided by BNU to the Territory are               €50 856 thousand, of which €22 931 thousand was
reconciled on a monthly basis during the first fifteen days          received immediately and €27 925 thousand was
of each month, based on the average daily balance of the             receivable in three equal instalments on 31 December
preceding month. The promissory note of the Macao                    2003, 2004 and 2005, which did not occur as payment
Government at 31 December 2005 and 2004 amounted to                  was deferred. However the respective interest has been
€166 465 thousand and €129 440 thousand, respectively.               paid. In February 2006 this operation was restructured, and
No interest is received on the promissory note,                      part of the outstanding principal has been received.
remuneration for the functions entrusted to Banco
Nacional Ultramarino, SA (Macao) being obtained by                   20. Resources of Central
means of a permanent non interest-bearing deposit.                   Banks and Other Credit
                                                                     Institutions

                                                                     This heading comprises the following:

                                                                                                                 2005                              2004

Resources of Central banks
Deposits and other resources
   Of domestic credit institutions                                                                                    377                           2 892
   Of foreign credit institutions                                                                                14 983                           68 210
Very short term resources
   Of foreign credit institutions                                                                                     848                                  -
Loans
   From foreign credit institutions                                                                              67 020                           40 329
Other resources                                                                                                       248                              401
Accrued interest                                                                                                        56                             245
                                                                                                                 83 532                          112 077

Resources of other credit institutions
Deposits and other resources
   Of domestic credit institutions                                                                              842 651                          695 497
   Of foreign credit institutions                                                                            2 233 156                        2 170 880
Interbank Money Market resources                                                                                 47 636                           14 480
Very short term resources
   Of domestic credit institutions                                                                               52 576                           30 102
   Of foreign credit institutions                                                                               569 831                           95 968
Loans
   From domestic credit institutions                                                                             93 737                           92 170
   From foreign credit institutions                                                                             419 576                          461 502
Sales operations with repurchase agreement                                                                       10 210                           45 588
Resources of international financial entities                                                                      8 731                            1 002
Accrued interest                                                                                                 24 227                           20 818
                                                                                                             4 302 331                        3 628 007
                                                                                                             4 385 863                        3 740 084




                                                     Notes to the Consolidated Financial Statements | Resources of Central Banks and Other Credit Institutions   215
      21. Customer Resources

      This heading comprises the following:

                                                                              2005          2004

      Savings deposits                                                       8 614 529    8 653 449
      Other debts
          Repayable on demand                                               17 233 193   15 413 762

          Term
               Deposits                                                     20 686 407   19 943 685
               Fixed rate products - Insurance                               2 205 213    2 373 094
               Mandatory deposits                                             847 962      937 473
               Other resources:
                    Cheques and orders payable                                106 989      152 907
                    Sales operations with repurchase agreement                 62 706       96 749
                    Loans                                                      20 617       25 719
          Other                                                               190 521       88 889
                                                                            24 120 415   23 618 516
      Accrued interest                                                        191 346      187 480
      Deferred costs net of deferred income                                    (1 835)      (9 718)
      Adjustments to liabilities under hedging operations                        4 315             -
                                                                            50 161 963   47 863 489


      The “Fixed rate products – insurance” heading corresponds to
      life insurance products classified as investment contracts (Note
      2.16.), which are recorded in accordance with IAS 39, in a
      similar way to the customer deposits in the banking
      activity.




      Notes to the Consolidated Financial Statements | Customer Resources
216
22. Debt Securities

This heading comprises:

                                                                                                        2005                            2004
Bonds issued:
Bonds issued under the EMTN Program
• Remuneration indexed to interest rates                                                            2 863 210                       3 715 374
• Remuneration indexed to shares/indexes                                                            1 582 631                          993 472
• Remuneration indexed to exchange rates                                                               435 677                         397 670
• Fixed interest rate                                                                                  371 946                         306 355
                                                                                                    5 253 464                       5 412 871
Cash-Bonds – Zero Coupon
• Remuneration indexed to shares/indexes                                                               105 609                         130 210
• Remuneration indexed to interest rates                                                                44 758                           80 958


Other cash bonds
• Remuneration indexed to interest rates                                                               395 124                         395 124
• Remuneration indexed to shares/indexes                                                               146 724                         149 216
• Fixed interest rate
    Increasing interest rate products                                                                  684 705                         639 669
    Other                                                                                              166 487                         193 621
                                                                                                    6 796 871                       7 001 669
Other:
Issues under the Euro Commercial Paper and Certificate Commercial Paper Programme
• Commercial Paper                                                                                  1 945 440                       2 767 888
• Deposit Certificates                                                                              1 193 084                          787 025
                                                                                                    3 138 524                       3 554 913
Issues under the US Commercial Paper Programme
  Commercial Paper                                                                                     380 442                         293 320
Other deposit certificates in:
• South African Rands                                                                                  130 570                         105 852
• US Dollars                                                                                           122 913                         188 689
• Mozambican Meticais                                                                                     4 312                                75
Securities issued under securitisation operations (Note 11.):
• Mortgage loans                                                                                       816 650                         908 313
• Consumer credit                                                                                      399 939                         399 932
Other liabilities                                                                                         1 372                           1 741
                                                                                                    4 994 722                       5 452 835
Adjustments to liabilities under hedging operations                                                  (198 127)                                   -
Deferred expenses, net of income                                                                       (60 422)                        (63 075)
Accrued interest                                                                                       118 993                           95 067
                                                                                                  11 652 037                       12 486 496




                                                                                    Notes to the Consolidated Financial Statements | Debt Securities   217
      At 31 December 2005 and 2004 issues under the Euro                 unsubordinated bonds, respectively. Maximum maturities
      Commercial Paper and Certificate Commercial Paper                  for these operations are not defined.
      programs comprised the following foreign currency issues:

                                                                                                      2005              2004

      Euros                                                                                        1 802 500         2 130 500
      US dollars                                                                                     903 196           749 947
      Pounds                                                                                         418 795           600 524
      Canadian dollars                                                                                10 929            70 053
      Australian dollars                                                                               3 104                   -
      Swiss francs                                                                                           -           3 889
                                                                                                   3 138 524         3 554 913


      To diversify its funding sources, CGD uses to the following        These securities may be issued at a discount and bear
      specific programs:                                                 interest at fixed or variable rates or indexed to the
                                                                         performance of indexes or shares.
      (i) Euro Commercial Paper and Certificate Commercial
      Paper
      Under the “EUR 5,000,000,000 Euro Commercial Paper
      and Certificate Deposits” programme, CGD (directly or
      through the France and London Branches) is able to issue
      deposit certificates (DC) and Notes with a maximum
      maturity of five years and one year, respectively,
      denominated in Euros, US dollars, Pounds, Japanese yens
      or any other currency the parties agree to. These issues
      may bear interest at fixed or variable rates, or be indexed
      to the performance of indexes or shares.


      (ii) US Commercial Paper
      Under this programme CGD North America Finance LLC
      may issue Notes up to a total of two billion US dollars. The
      Notes have a maximum maturity of one year and a
      minimum amount of 250 000 US dollars. The issues may
      be issued at a discount or par. All the issues are guaranteed
      by CGD.


      (iii) Euro Medium Term Notes ((EMTN)
      Under this programme the CGD Group, through CGD
      (directly or through the France, London and Madeira
      Branches) and CGD Finance, may issue debt securities up
      to a maximum of €10 000 000 000. The France Branch
      guarantees all the issues of CGD Finance.


      Bonds may be issued in any currency with minimum
      maturities of one month and 5 years for subordinated and




      Notes to the Consolidated Financial Statements | Debt Securities
218
At 31 December 2005 and 2004 the bonds issued, by type
of remuneration and residual term to maturity, were as
follows:

                                                                                      2005
                                                                 EMTN Program
                                                        Type of asset or underlying index
                                                    used to calculate the remuneration
                                              Shares/       Exchange       Interest             Sub-                 Other
                                             Indexes           rate          rate               total               bonds               Total

Up to one year                                62 230                  -    214 370             276 600             574 331             850 931
One to five years                            559 051           19 800     2 655 183          3 234 034             969 076          4 203 110
Five to ten years                            785 472            5 300      263 060           1 053 832                       -      1 053 832
Over ten years                               175 878          410 577      102 543             688 998                       -         688 998


                                           1 582 631          435 677     3 235 156          5 253 464           1 543 407          6 796 871




                                                                                      2004
                                                                 EMTN Program
                                                        Type of asset or underlying index
                                                    used to calculate the remuneration
                                              Shares/       Exchange       Interest             Sub-                 Other
                                             Indexes           rate          rate               total               bonds               Total

Up to one year                                58 332            2 864     2 915 230          2 976 426             338 368          3 314 794
One to five years                            204 953            1 500      577 966             784 419           1 250 430          2 034 849
Five to ten years                            641 063            3 222      443 500           1 087 785                       -      1 087 785
Over ten years                                89 124          390 084       85 033             564 241                       -         564 241


                                             993 472          397 670     4 021 729          5 412 871           1 588 798          7 001 669


Derivatives have been contracted for the majority of issues
under the EMTN Programme under which their amounts
are transformed into Euro and respective interest is
transformed to 3 or 6 month Euribor rates plus or minus a
spread.




                                                                                    Notes to the Consolidated Financial Statements | Debt Securities   219
      23. Provisions and Contingent
      Liabilities

      Provisions
      The changes in the provisions for employee benefits and
      provisions for other risks in 2005 and 2004 were as
      follows:

                                                                                                                           2005


                                                          Balance at Acquisition of Transition                                                       Exchange               Balance at
                                                          31.12.2004      subsidiaries     to IAS 39        Additions    Reversals     Utilisations differences    Other    31.12.2005

      Provision for employee benefits                     361 838           28 069                  -         7 969          (79)       (27 222)       277        100 867   471 719


      Provision for litigation                                9 250                  -              -          3 018          (52)          (113)        90           234     12 427
      Provision for guarantees and
        other commitments                                    28 081                  -              -          9 412         (192)          (169)         -         1 058     38 190
      Provision for other risks and charges                233 036           13 662             (381)        164 717    (120 767)       (100 633)       864         8 078    198 576
                                                           270 367           13 662             (381)        177 147    (121 011)       (100 915)       954         9 370    249 193
                                                           632 205           41 731             (381)        185 116    (121 090)       (128 137)     1 231       110 237    720 912



                                                                                                                           2004


                                                                          Balance at      Transition                                                Exchange                Balance at
                                                                          31.12.2003       to IAS 39        Additions   Reversals      Utilisations differences    Other    31.12.2004
                                                                                         (Note 43.)
      Provision for employee benefits                                      28 169         305 433             2 593        (121)      (18 780)          (30)      44 574    361 838


      Provision for litigation                                               9 087                      -        204              -       (52)                -       11       9 250
      Provision for guarantees and
        other commitments                                                   28 274                      -          -        (192)            -                -       (1)     28 081
      Provision for other risks and charges                                161 031             (5 673)       190 826    (137 387)      (9 261)          (22)       33 522    233 036
                                                                           198 392             (5 673)       191 030    (137 579)      (9 313)          (22)       33 532    270 367
                                                                           226 561         299 760           193 623    (137 700)     (28 093)          (52)       78 106    632 205




      The breakdown and changes in the provision for employee
      benefits are shown in Note 36..


      The provision for litigation corresponds to the best estimate
      of the Group as to the amounts to be spent on their
      resolution, based on estimates of the Law Department and
      lawyers that accompany the processes.


      The heading ”Acquisition of subsidiaries” in 2005
      corresponds essentially to provisions recorded by Império
      Bonança, which started to be consolidated this year (Note 3.).




      Notes to the Consolidated Financial Statements | Provisions and Contingent Liabilities
220
Contingent Liabilities and
Commitments
The contingent liabilities relating to the banking activity,
which are reflected in off-balance sheet headings, are
made up as follows:

                                                                                                                   2005                            2004


Contingent liabilities
   Guarantees and sureties                                                                                     3 060 897                        2 967 914
   Assets given as collateral                                                                                  2 056 385                           913 523
   Stand by letters of credit                                                                                    399 205                           427 250
   Open documentary credits                                                                                        99 735                           98 043
   Transactions with recourse                                                                                        1 404                               921
   Acceptances and endorsements                                                                                         749                              338
   Bonds and indemnities                                                                                                    -                       23 112
   Other contingent liabilities                                                                                    37 239                             7 155
                                                                                                               5 655 614                        4 438 256
Commitments
   Revocable commitments                                                                                     11 419 596                         7 933 309
   Securities subscribed for                                                                                   2 138 083                           331 921
   Other irrevocable commitments                                                                               1 573 253                        1 256 228
   Irrevocable lines of credit                                                                                   796 378                           541 538
   Term liabilities relating to annual contributions to the Deposit Guarantee Fund                               147 476                           142 567
   Investors’ indemnity system                                                                                       9 600                          13 120
   Term operations                                                                                                 92 180                           91 186
   Forward deposit agreements                                                                                    348 845                           159 838
   Other                                                                                                         123 099                            10 801
                                                                                                             16 648 510                       10 480 508

Deposit and custody of securities                                                                            75 424 278                       74 891 740




Assets given as collateral are not available for free use by
the Group in its operations and are recorded at their
nominal value. At 31 December 2005 and 2004 these
assets corresponded to the following situations:



                                                                                                                   2005                             2004
Consigned resources
 KfW                                                                                                             918 000                            11 250
 European Development Bank                                                                                       802 500                           587 500
Bank of Portugal                                                                                                 315 666                           309 554
Royal Bank of Scotland                                                                                             15 000                                    -
Investors Indemnity System (futures)                                                                                 4 450                            4 450
Lease charges                                                                                                           769                              769
                                                                                                               2 056 385                           913 523




                                                                          Notes to the Consolidated Financial Statements | Provisions and Contingent Liabilities   221
      Assets given as collateral correspond to debt instruments,                               At 31 December 2004, part of the provision for other risks
      except for guarantees given to the European Development                                  and charges was to cover CGD’s estimate of the amounts
      Bank which include loans granted by Caixa in the amount                                  payable under the terms of the Contract of Association
      of €692 500 thousand.                                                                    entered into with Unibanco.


      In addition, CGD gave securities in the amount of                                        In 2005 Caixa signed a “Transaction and Settlement
      €172 745 thousand as collateral for term commitments                                     Contract” with Unibanco. Under the terms of the contract
      relating to annual contributions to the Deposit Guarantee                                Caixa   paid    238    000    thousand     Brazilian   reais
      Fund and Investor Indemnity System.                                                      (€76 096 thousand), having used the provision for other
                                                                                               risks and charges to cover the amount. In exchange, both
      The Deposit Guarantee Fund (DGF) is to guarantee deposits                                parties agreed on the full and irrevocable settlement of all
      of customers, in accordance with limits established in the                               liabilities and responsibilities assumed under the Contract
      General Regime of Credit Institutions. Regular annual                                    of Association, except for contingencies relating to certain
      contributions are made for this purpose. The annual                                      tax processes against Bandeirantes.
      contribution to the DGF for 2005 and 2004, in accordance
      with the applicable regulations, was €14 878 thousand                                    Considering the evolution of the tax contingencies and the
      and €19 322 thousand, respectively.                                  Part of this        existence of some rulings favourable to Bandeirantes, the
      commitment, in the amounts of €4 909 thousand and                                        Board of Directors believes that the probability of Caixa
      €9 747 thousand, respectively, was assumed through an                                    having to make any payments relating to these tax
      irrevocable commitment to pay the contributions when                                     contingencies is remote and so no provisions have been
      required to do so by the Fund. These amounts are not                                     recorded for this purpose.
      charged to costs. The total amount the commitments
      assumed since 1996 is €147 476 thousand and
      €142 567 thousand, respectively.


      Banco Bandeirantes’ Contingencies
      In 2000 Caixa acquired a participation in Unibanco
      Holdings, SA and Unibanco – União de Bancos Brasileiros
      (both referred to as “Unibanco”), in exchange for shares it
      held in Banco Bandeirantes, SA (Bandeirantes). Under the
      terms of the Contract of Association, Caixa assumed the
      liability for the payment of potential losses arising from
      contingencies of Banco Bandeirantes, namely those relating
      to the liquidation of Banco Banorte, SA (Banorte) and tax
      and other processes. In addition, the contract established
      that Unibanco could claim, up to December 2006, general
      contingencies not specifically identified at the transaction
      date.


      Up to 31 December 2004 CGD paid 26 045 thousand
      Brazilian reais (€8 453 thousand) relating to these matters,
      of which 2 333 thousand Brazilian reais (€639 thousand)
      was paid in 2004.




      Notes to the Consolidated Financial Statements | Provisions and Contingent Liabilities
222
24. Other Subordinated
Liabilities

This heading comprises the following:

                                                                                                             2005                            2004

CGD Finance - € 400 000 000 6.25 percent Notes due 2009                                                   400 000                          400 000
CGD Finance - € 10 000 000 Floating Rate Subordinated Notes due 2010                                        10 000                          10 000
CGD Finance - € 200 000 000 Floating Rate Subordinated Notes due 2011                                     121 540                          125 000
CGD Finance - € 110 000 000 Floating Rate Undated Subordinated Notes                                      110 000                          110 000
CGD (France Branch) - € 110 000 000 Floating Rate Undated Subordinated Notes                              110 000                          110 000
CGD (France Branch) - € 250 000 000 Floating Rate Subordinated Notes                                      250 000                                    -
CGD (France Branch) - € 21 000 000 Floating Rate Subordinated Notes                                         21 000                                   -
Subordinated Cash Bonds - Renda Mais 2001/2011 – 1st issue                                                100 000                           99 903
Subordinated Cash Bonds - Renda Mais 2001/2011 - 2nd issue                                                173 368                          173 368
Subordinated Cash Bonds - Renda Mais 2002/2012                                                            150 000                          150 000
Subordinated Cash Bonds - Renda Mais 2005/2015                                                            104 890                                    -
Subordinated Cash Bonds BNU Subordinadas/97                                                                 49 862                          49 862
Subordinated Cash Bonds BNU Subordinadas/98                                                                 49 880                          49 880
Schuldschein Loan “Caja Madrid”                                                                             42 383                                   -
CGD Finance - € 205 000 000 Floating Rate Subordinated Notes due 2010                                               -                      205 000
Subordinated Cash Bonds - Renda Mais 2000/2010                                                                      -                      119 131
                                                                                                       1 692 923                        1 602 144
Interest payable                                                                                            10 184                            6 208
Deferred expenses                                                                                             (809)                                  -
                                                                                                       1 702 298                        1 608 352




                                                                         Notes to the Consolidated Financial Statements | Other Subordinated Liabilities   223
      The conditions of the principal issues are as follows:

                                                               Date of                                                       Interest rate as at
               Bonds                      Nominal      Issue      Redemption     Interest payment         Remuneration      31.12.2005 31.12.2004          Early redemption clause


      CGD Finance - €400.000.000          400,000 12.10.1999      12.10.2009    12 October                Fixed rate         6.250%      6.250%     N/A
      6.25 percent Notes due 2009                                                each year


      CGD Finance - €10.000.000            10,000 27.07.2000      27.07.2010    Quarterly, April,         3 month Euribor    2.840%      2.745%     N/A
      Floating Rate Notes due 2010                                              on 27January,             rate + 0.60%
                                                                                July and October


      CGD Finance                         200,000 03.12.2001      03.12.2011    Quarterly,                3 month Euribor    3.139%      2.824%     From 3 de 3 de Dezembro de 2006.
                                                                                                                                                    A partir December 2006 onwards. If
      €200.000.000 Floating Rate                                                on 3 March,               rate + 0.65%                              there is no early o reembolso antecipado,
                                                                                                                                                    Caso não ocorra redemption, after this
      Subordinated Notes due 2011                                               June, September                                                     date the data a taxa de juro aplicável
                                                                                                                                                    após esta applicable interest rate will be
                                                                                and December                                                        the a taxa Euribor a rate plus 1.15%
                                                                                                                                                    será 3 month Euribor 3 meses acrescida
                                                                                                                                                    de 1.15%


      CGD Finance                         110,000 18.12.2002        Perpétuas   Quarterly,                3 month Euribor    4.420%      3.475%     From 18 December 2012 onwards. If
                                                                                                                                                    A partir de 18 de Dezembro de 2012.
      €110.000.000 Floating Rate                                                on 18 March,              rate + 1.30%                              there is no early o reembolso antecipado,
                                                                                                                                                    Caso não ocorra redemption, after this
      Undated Subordinated Notes                                                June, September                                                     date the data a taxa de juro aplicável
                                                                                                                                                    após esta applicable interest rate will be
                                                                                and December                                                        the a taxa Euribor a rate plus 2.80%
                                                                                                                                                    será 3 month Euribor 3 meses acrescida
                                                                                                                                                    de 2.80%


      CGD (France branch)                 110,000 18.12.2002        Perpétuas   Quarterly,                3 month Euribor    4.420%      3.475%     A partir de 18 de Dezembro de 2012.
                                                                                                                                                    From 18 December 2012 onwards. If
      €110.000.000 Floating Rate                                                on 18 March,              rate + 1.30%                              there is no early o reembolso antecipado,
                                                                                                                                                    Caso não ocorra redemption, after this
      Undated Subordinated Notes                                                June, September                                                     date the data a taxa de juro aplicável
                                                                                                                                                    após esta applicable interest rate will be
                                                                                and December                                                        the a taxa Euribor a rate plus 2.80%
                                                                                                                                                    será 3 month Euribor 3 meses acrescida
                                                                                                                                                    de 2.80%


      CGD (France branch)                 250,000 27.04.2005      27.04.2015    Quarterly,                3 month Euribor    2.680%            -    From 27 April de Abril de 2010.
                                                                                                                                                    A partir de 27 2010 onwards. If there is
      €250.000.000 Floating Rate                                                on 27 January,            rate + 0.25%                              no early ocorra o reembolso
                                                                                                                                                    Caso nãoredemption, after this date the
      Subordinated Notes                                                        April, July and October                                             applicable após rate will be the
                                                                                                                                                    antecipado,interestesta data a taxa 3
                                                                                                                                                    month aplicável será a taxa Euribor
                                                                                                                                                    de juro Euribor rate plus 0.75%
                                                                                                                                                    a 3 meses acrescida de 0.75%

      CGD (France branch)                  21,000 14.07.2005      28.06.2016    Half yearly,              6 month Euribor    2.650%            -    N/A
      €21.000.000 Floating Rate                                                 on 28 June                rate + 0.22%
      Subordinated Notes                                                        and Decembe


      Obrigações de Caixa Subordinadas   100,000 04.06.2001       04.06.2011    Half yearly,              6 month Euribor    3.133%      2.700%     A partir December 2006 onwards. If
                                                                                                                                                    From 4 de 4 de Dezembro de 2006.
      Renda Mais 2001/2011 - 1.ª emissão                                        on 4 June                 rate + 0.50%                              there de juro aplicável será a taxa
                                                                                                                                                    a taxa is no early redemption, after this
                                                                                and December                                                        date não ocorra o interest rate will
                                                                                                                                                    Caso the applicablereembolso Euriborbe
                                                                                                                                                    the 6 month Euribor rate plus
                                                                                                                                                    a 6 meses acrescida de 1% de 1%



      Obrigações de Caixa Subordinadas   173,368 03.12.2001       03.12.2011    Half yearly,              6 month Euribor    3.133%      2.710%     From 3 de 3 de Dezembro de 2006.
                                                                                                                                                    A partir December 2006 onwards. If there
      Renda Mais 2001/2011 - 2.ª emissão                                        on 23 June                rate + 0.50%                              is no early redemption, after antecipado,
                                                                                                                                                    Caso não ocorra o reembolsothis date the
                                                                                and December                                                        após esta data a taxa de juro aplicável
                                                                                                                                                    applicable interest rate will be the 6 month
                                                                                                                                                    será a taxa Euribor a 6 meses acrescida de 1%
                                                                                                                                                    Euribor rate plus 1%


      Obrigações de Caixa Subordinadas    150,000 31.10.2002      31.10.2012    Half yearly,              6 month Euribor    2.868%      2.699%     From 3 de 3 de Dezembro de 2006.
                                                                                                                                                    A partir December 2006 onwards. If there
      Renda Mais 2002/2012                                                      on 2 May                  rate + 0.50%                              is no early redemption, after antecipado,
                                                                                                                                                    Caso não ocorra o reembolsothis date the
                                                                                and 31 October                                                      após esta data a taxa de juro aplicável será
                                                                                                                                                    applicable interest rate will be the 6 month
                                                                                                                                                    Euribor rate plus meses acrescida de 1%
                                                                                                                                                    a taxa Euribor a 61%


      Obrigações de Caixa Subordinadas    104,891 29.06.2005      03.07.2015    Half yearly,              6 month Euribor    2.372%      2.699%     From 3 de de Julho de 2010.
                                                                                                                                                    A partir July32010 onwards. If there is no
      Renda Mais 2005/2015                                                      on 3 January              rate + 0.25%                              early redemption, reembolso antecipado,
                                                                                                                                                    Caso não ocorra oafter this date the
                                                                                and July                                                            após esta data a taxa de juro aplicável será
                                                                                                                                                    applicable interest rate will be the 6 month
                                                                                                                                                    Euribor rate plus meses
                                                                                                                                                    a taxa Euribor a 60.75% acrescida de 0.75%


      Obrigações de Caixa BNU              49,880 15.10.1997      15.10.2007    Half yearly,              6 month Euribor    2.438%      2.334%      For últimos cinco anos, mediante
                                                                                                                                                    Nos the last five years Caixa, with prior
      subordinadas /97                                                          on 15 April               rate + 0.15%                               authorisation from the Bank of Portugal,
                                                                                                                                                    autorização do Banco de Portugal, a Caixa
                                                                                and October                                                          may redeem the loan early, in full or in
                                                                                                                                                    poderá procede ao reembolso antecipado,
                                                                                                                                                     part.
                                                                                                                                                    total ou parcial, do empréstimo.



      Obrigações de Caixa BNU              49,880 01.10.1998      01.10.2008    Half yearly,              6 month Euribor    2.438%      2.350%     Nos the last five years Caixa, with prior
                                                                                                                                                     For últimos cinco anos, mediante
      subordinadas /98                                                          on 1 April                rate + 0.15%                               authorisation from the Bank of Portugal,
                                                                                                                                                    autorização do Banco de Portugal, a Caixa
                                                                                and October                                                          may redeem the loan early, in antecipado,
                                                                                                                                                    poderá proceder ao reembolso full or in
                                                                                                                                                     part.
                                                                                                                                                    total ou parcial, do empréstimo.


       Schuldschein Loan                   42,383 18.08.2005      18.08.2015    Quarterly,                Fixed rate         5.150%            -     For últimos cinco anos, mediante
                                                                                                                                                    Nos the last five years Caixa, with prior
      "Caja Madrid"                                                             on 18 February,                                                     autorização do Banco de Portugal, a Caixa
                                                                                                                                                     authorisation from the Bank of Portugal,
                                                                                May, August                                                          may redeem the loan early, in antecipado,
                                                                                                                                                    poderá proceder ao reembolso full or in
                                                                                and November                                                        total ou parcial, do empréstimo.
                                                                                                                                                     part.




      Notes to the Consolidated Financial Statements | Other Subordinated Liabilities
224
25. Other Liabilities

This heading comprises the following:

                                                                                 2005                             2004
Creditors:
    Consigned resources                                                      2 525 299                        1 537 230
    Suppliers of finance leasing assets                                          40 513                           21 015
    Other suppliers                                                              91 900                           83 315
    Resources – collateral account                                               30 141                           30 202
    Resources – subscription account                                             11 273                                    -
    Resources – secured account                                                    3 103                               715
Other creditors:
    For the acquisition of Império Bonança (Note 3.)                             87 961                          360 073
    Caixa Geral de Aposentações                                                 156 510                           31 147
    Creditors for factoring ceded                                                48 123                           43 284
    Creditors for operations on securities                                         9 818                            3 303
    Creditors for futures contracts                                                   632                              472
    Creditors for direct insurance and reinsurance                              118 493                                    -
    Other                                                                       580 916                          399 508
Other liabilities:
    Notes in circulation – Macao (Note 19.)                                     187 774                          127 801
    Withholding taxes                                                            55 086                           53 541
    Social Security contributions                                                13 428                           13 093
    Other taxes payable                                                          13 234                           12 188
    Collections on behalf of third parties                                         3 515                            3 158
    Other                                                                        30 449                           16 096
Deferred expenses:
    Creditors and other resources                                                     (25)                           (636)
Accrued costs:
    Interest and similar costs                                                   12 619                           13 893
    Staff costs
        Long service bonus – CGD (Note 36.)                                      44 375                           45 514
        Other                                                                   132 198                          113 371
    General administrative costs                                                 10 071                             9 070
    Other accrued costs                                                          52 672                           24 319
Deferred income:
    Commissions and fees charged on credit agreements                           103 564                                    -
    Other                                                                        26 876                           15 238
Liabilities pending settlement                                                  466 478                          493 536
Stock exchange operations                                                                 -                       14 767
                                                                             4 856 996                        3 465 213




At 31 December 2005 and 2004 accrued staff costs
included €26 744 thousand and €26 500 thousand,
respectively, relating to productivity bonuses payable to
CGD’s employees.




                                                            Notes to the Consolidated Financial Statements | Other Liabilities   225
      At 31 December 2005, the conditions of the consigned
      resources were as follows:

                                                                                                   Agreed     Balance at      Starting
          Operation                                                       Counterparty             balance    31.12.2005       date        Maturity

      Operations carried out by CGD
      KfW 900                                               KfW - Kreditanstalt für Wiederaufbau   900 000     900 000     12/12/2005     25/09/2015
      KfW 300 MIO                                           KfW - Kreditanstalt für Wiederaufbau   300 000     300 000     07/04/2004     17/03/2014
      Infraestruturas Municipais I                          KfW - Kreditanstalt für Wiederaufbau   250 000     250 000     22/11/2004     22/11/2013
      CGD - Empréstimo Global XII                                      European Investment Bank    200 000     200 000     19/11/2004     15/09/2024
      CGD Empréstimo Global XI                                         European Investment Bank    200 000     200 000     25/06/2003     15/06/2023
      CGD Empréstimo Global X                                          European Investment Bank    200 000     200 000     21/11/2002     15/09/2022
      CGD Reabilitação Urbana                                          European Investment Bank    150 000     150 000     11/12/2003     15/09/2012
      CGD/BNU Global Loan IX                                           European Investment Bank    150 000     150 000     27/10/2000     15/12/2023
      CEB Pré-Escolar                               CEB - Council of Europe Development Bank       100 000     100 000     11/12/2002     15/09/2024
      CEB - Serra dos Candeiros                     CEB - Council of Europe Development Bank        30 161      28 150     19/11/2004     25/11/2019
      Projecto Municipal Infra EG - III                                European Investment Bank     27 434      15 942     18/04/1995     15/09/2012
      Projecto Municipal Infra EG - III - B                            European Investment Bank     27 434      10 448     14/11/1997     15/09/2010
      CEB Pré-Escolar                               CEB - Council of Europe Development Bank        10 475       6 376     07/04/2005     25/10/2012
      CGD Reabilitação Urbana                                          European Investment Bank     12 470       5 769     19/12/1996     15/06/2011
      Infraestruturas Municipais II                         KfW - Kreditanstalt für Wiederaufbau     7 669       2 300     30/01/1991     31/12/2010

      Operations carried out by BCI Moçambique                                                                   5 183

      Other                                                                                                      1 131

                                                                                                             2 525 299



      At 31 December 2005, CGD’s consigned resources bore                                The Shareholder’s General Meeting held in April 2004
      interest at the annual average rate of 2.37%.                                      decided to distribute a dividend of €320 380 thousand to
                                                                                         the State out of net income for 2003, corresponding to
      26. Share Capital                                                                  €0.65 per share.


      At 31 December 2005 and 2004 CGD’s share capital, made                             In 2005 Caixa did not distribute a dividend out of net income
      up of 590 000 000 shares of €5 each, was totally held by                           for the previous year. The Shareholder’s General Meeting of
      the Portuguese State.                                                              17 June 2005 decided the use of €300 000 thousand of the
                                                                                         share premium and €538 933 thousand of the legal reserve
      In 2004, as a result of a unanimous decision of the                                to cover the negative balance of retained earnings.
      Shareholder’s General Meeting of 16 December 2004, CGD’s
      share capital was increased by €500 000 thousand through                           The average number of shares issued used to calculate
      the issuance of 100 000 000 shares of €5 each plus a                               earnings per share for 2004 was 494,109,589, calculated
      premium of €3 per share. The capital increase was paid up                          based on the number of subscribed shares, weighted by
      by the transfer of 179 372 198 shares of EDP – Energias de                         the number of days before and after the capital increase.
      Portugal, SA (EDP), corresponding to 4.91% of its share
      capital, at €2.23 per share, corresponding to the
      listed price of EDP shares on Euronext Lisbon on
      13 December 2004, totalling €400 000 thousand (Note 8.).
      The remaining €400 000 thousand was paid up in cash.




      Notes to the Consolidated Financial Statements | Share Capital
226
27. Reserves, Retained
Earnings and Net Income

At 31 December 2005 and 2004, this heading comprises
the following:

                                                                                                                2005                            2004

Share premium                                                                                                             -                     300 000

   Fair value reserve, net of deferred tax                                                                      565 467                         125 835

   Other reserves and retained earnings
       Legal reserve – CGD                                                                                      397 097                         878 945
       Other reserves                                                                                          (464 847)                       (258 018)
       Retained earnings                                                                                       (346 719)                    (1 199 159)
                                                                                                              (414 469)                       (578 232)

   Net income attributable to the shareholder of CGD                                                            537 667                         222 909
                                                                                                                688 665                           70 512




Under the terms of Ministerial Order 408/99 of 4 June,                 In 2005 Caixa transferred €60 152 thousand to “Retained
published in Diário da República – I B Series, no. 129                 earnings” relating to the portion of the revaluations already
(Portuguese Official Gazette) share premiums cannot be used            realised through depreciation.
to pay dividends or for the acquisition of treasury shares.
During 2005 share premiums were fully used to cover the                The “Fair value reserve” reflects unrealised gains and losses in
negative balance of retained earnings.                                 available-for-sale financial assets, net of the corresponding tax
                                                                       effect.
Under CGD’s Articles of Association a minimum of 20% of
annual net income must be transferred to the legal reserve.
                                                                       The currency translation reserve, which reflects the effect of
This reserve can only be used to cover accumulated losses
                                                                       translating the foreign currency financial statements of
or for capital increases.
                                                                       subsidiaries, is included in “Other reserves”.

The “Other reserves” heading includes the legal reserve of
CGD amounting to €397 097 thousand at 31 December
2005, and the legal reserves, free reserves and legal
revaluation reserves of its subsidiaries and associates. The
legal revaluation reserve can only be used to cover
accumulated losses or for capital increases. CGD’s reserves
not   distributable     for    this    reason   amounted     to
€241 027 thousand at 31 December 2005, and were
recorded in compliance with the following legislation:

Tangible fixed assets:
    Decree-Law 219/82, of 2 June                        32 423
    Decree-Law 399 - G/84, of 28 December               25 394
    Decree-Law 118 - B/86, of 27 May                    32 200
    Decree-Law 111/88, of 2 April                       21 423
    Decree-Law 49/91, of 25 January                     57 781
    Decree-Law 264/92, of 24 November                   55 203
    Decree-Law 31/98, of 11 February                    76 032
Financial fixed assets                                     723
                                                       301 179

Adjustment by credit to retained earnings              (60 152)
                                                       241 027




                                                                  Notes to the Consolidated Financial Statements | Reserves, Retained Earnings and Net Income   227
      CGD’s consolidated net income was determined as follows:

                                                                                                                   2005       2004
      Caixa Geral de Depósitos, SA
      Caixa Geral de Depósitos and International Financial Branch                                                333 685     87 049
      France Branch                                                                                                4 320      4 228
      Madeira Offshore Financial Branch                                                                            3 376      6 051
      Timor Branch                                                                                                 3 048      2 576
      New York Branch                                                                                              2 195      4 470
      London Branch                                                                                                2 115     15 577
      Cayman Branch                                                                                                1 921      3 844
      Luxembourg Branch                                                                                              829      1 735
      Zhuhai Branch                                                                                                  139          5
      Monaco Branch                                                                                                  132         47
                                                                                                                 351 760    125 582
      Dividends received by CGD                                                                                  (18 332)   (17 977)
      Elimination of gains/losses in the sale of investments                                                    (169 618)       784
                                                                                                       (A)       163 810    108 389
      Contribution of subsidiaries to net income:
      Caixa – Brasil, SGPS, SA                                                                                   160 054     12 076
      Caixa Seguros, SGPS, SA(a)                                                                                 118 440     67 188
      Banco Simeón, SA          (a)                                                                              (31 077)   (11 629)
      Caixa-Banco de Investimento, SA                (a)                                                          24 909     22 157
      Banco Nacional Ultramarino, SA (Macao)                                                                      20 720      8 030
      Caixa Leasing e Factoring – IFIC, SA                                                                        14 834     13 125
      Mercantile Bank Holdings, Ltd.                                                                               7 753    (23 539)
      Venture Capital Fund for Qualified Investors - CGD Group                                                     4 256     (5 418)
      Caixagest - Técnicas de Gestão de Fundos, SA                                                                 4 085      2 397
      Banco Comercial e de Investimentos, SARL                                                                     3 422      1 402
      Fundimo - Sociedade Gestora de Fundos de Investimento Imobiliário, SA                                        3 201      2 166
      Banco Comercial do Atlântico, SA                                                                             1 858      1 026
      Esegur – Empresa de Segurança, SA                                                                            1 594      1 861
      Caixaweb, SGPS, SA                                                                                          (1 171)    (1 734)
      Nostrum Mortgages Plc                                                                                        1 034      4 535
      Caixa Crédito – Sociedade Financeira para Aquisições a Crédito, SA                                             984      1 311
      Imocaixa – Gestão Imobiliária, SA                                                                              333      1 138
      Caixa - Gestão de Activos, SGPS, SA                                                                             39        723
      Caixa Participações, SGPS, SA                                                                                  (12)      (105)
      Other                                                                                                        2 377     (1 489)
                                                                                                       (B)       337 633     95 221


      Contribution of associates to net income:
      REN – Rede Eléctrica Nacional, SA                                                                           21 993     13 860
      ADP - Águas de Portugal, SA                                                                                  2 700      2 445
      SIBS – Sociedade Interbancária de Serviços, SA                                                               1 432      2 397
      Other                                                                                                       (1 076)     1 346
                                                                                                       (C)        25 049     20 048
      Adjustments to the Group’s net income:
      Elimination of additions to and reversals of provisions for losses on
           investments, recorded in the non-consolidated accounts                                                 (3 029)    (8 289)
      Other                                                                                                       14 204      7 540
                                                                                                       (D)        11 175      (749)
      Consolidated net income attributable to the shareholder of CGD                                (A+B+C+D)    537 667    222 909

      (a) Data taken from the consolidated financial statements.




      Notes to the Consolidated Financial Statements | Reserves, Retained Earnings and Net Income
228
Net income of Caixa – Brasil results mainly from the
realised gain on the sale of the investments in Unibanco
and Unibanco Holdings (Note 8.).


28. Minority Interest

Third party investments in subsidiary companies, by entity,
are made up as follows:

                                                                                                     2005                            2004

Caixa Geral Finance                                                                               600 094                          253 811
Inbepor – Investimentos e Bebidas, SGPS, SA (Note 3.)                                               24 714                                   -
Banco Comercial e de Investimentos, SARL                                                            20 024                           21 258
Fundo de Investimento Imobiliário Fechado Saudeinvest                                               15 519                                   -
Mercantile Bank Holdings, Ltd.                                                                        6 100                           5 160
Banco Comercial do Atlântico, SARL                                                                    5 143                           3 741
FIQ Grupo CGD – Caixa Capital                                                                         5 133                           4 100
FIQ PME – Caixa Capital                                                                               4 262                           4 312
Banco Interatlântico, SARL                                                                            1 594                           1 485
A Promotora – Sociedade de Capital de Risco, SARL                                                     1 189                           1 326
Banco Simeón, SA                                                                                        977                              623
Caixa - Banco de Investimento, SA                                                                       729                              748
Garantia – Companhia de Seguros de Cabo Verde, SARL                                                     719                              604
Caixanet, Telemática e Comunicações, SA                                                                 344                              330
Other                                                                                                     24                               23
                                                                                                  686 565                          297 521




Caixa Geral Finance is a company based on the Cayman            On 30 September 2005 Caixa Geral Finance issued non-
Islands, with share capital of €1 000. On 28 June 2004          voting preference shares totalling €350 000 thousand. If
the company issued non-voting preference shares totalling       it is decided to pay dividends, a quarterly dividend
€250 000 thousand. If it is decided to pay dividends, a         calculated on the basis of an annual interest corresponding
quarterly dividend calculated on the basis of annual interest   to the 3 month Euribor rate plus 0.77% up to
corresponding to the 3 month Euribor rate plus 0.8% up          30 September 2015 and 1.77% as from that date, will be
to 28 June 2014 and 1.8% as from that date, will be paid        paid to the preference shareholders. Caixa Geral Finance
to the Preference shareholders. Caixa Geral Finance may         may redeem the preference shares, in part or in full, as
redeem the preference shares, in part or in full, as from       from 30 September 2015, at €50 per share, plus the
28 June 2014, at €1 000 per share, plus the dividend            dividend accrued since the last payment.
accrued since the last payment.




                                                                              Notes to the Consolidated Financial Statements | Minority Interest   229
      The proportion of consolidated net income attributable to
      minority shareholders for 2005 and 2004 is as follows:


                                                                           2005     2004

      Caixa Geral Finance                                                  10 067    3 811
      Banco Comercial e de Investimentos, SARL                              4 658    3 018
      Banco Comercial do Atlântico, SARL                                    1 231      740
      Mercantile Bank Holdings, Ltd.                                         711    (2 159)
      Other                                                                  449      (332)
                                                                           17 116    5 078




      Notes to the Consolidated Financial Statements | Minority Interest
230
29. Interest and Similar
Income and Costs

These headings are made up as follows:


                                                                                                               2005                             2004

Interest and similar income
Interest on loans and advances to domestic credit institutions                                                19 874                           29 497
Interest on loans and advances to foreign credit institutions                                               188 947                          184 764
Interest on domestic credit                                                                               1 647 878                       1 609 233
Interest on foreign credit                                                                                  139 253                            98 270
Interest on overdue credit                                                                                    44 873                           38 614
Interest on financial assets held for trading
    Derivatives                                                                                             508 761                          207 849
    Securities                                                                                              133 229                          131 387
    Other                                                                                                       1 224                                  -
Interest on financial assets at fair value through profit or loss                                             76 730                         118 440
Interest on available-for-sale financial assets                                                             105 294                          173 304
Interest on hedging derivatives                                                                             142 494                          124 356
Interest on held-to-maturity investments                                                                              4                            661
Interest on debtors and other applications                                                                      9 972                           8 027
Interest on cash equivalents                                                                                  23 375                           21 674
Other interest and similar income                                                                             14 762                           16 711
Commissions received relating to amortised cost                                                               58 468                           53 885
Other                                                                                                       162 751                            20 431
                                                                                                          3 277 889                       2 837 103




                                                                                                               2005                            2004

Interest and similar costs
Interest on deposits of
    Central and local government                                                                              40 884                           33 992
    Other residents                                                                                         409 594                          442 207
    Emigrants                                                                                                 57 960                           75 329
    Other non-residents                                                                                       85 072                           49 885
    Fixed rate products - insurance                                                                           48 352                           74 857
    Other                                                                                                       2 041                           2 850
Interest on resources of foreign credit institutions                                                          94 857                           79 580
Interest on resources of domestic credit institutions                                                         20 019                           30 084
Interest on swaps                                                                                           541 180                          165 886
Interest on other trading liabilities                                                                           5 186                                  -
Interest on unsubordinated debt securities                                                                  334 306                          323 940
Interest on hedging derivatives                                                                             117 642                            80 365
Interest on subordinated liabilities                                                                          60 291                           58 520
Other interest and similar costs                                                                              53 332                           52 158
Commissions paid relating to amortised cost                                                                     4 247                                  -
Other                                                                                                         37 497                           21 814
                                                                                                          1 912 460                       1 491 467




                                                                    Notes to the Consolidated Financial Statements | Interest and Similar Income and Costs   231
      30. Income from Equity
      Instruments

      This heading comprises the following:


                                                                                                                                            2005        2004

      EDP - Energias de Portugal, SA                                                                                                        32 720      12 826
      Unibanco e Unibanco Holdings                                                                                                          18 547      12 232
      Portugal Telecom, SGPS, SA                                                                                                            18 097      11 375
      Banco Comercial Português, SA                                                                                                          5 755      14 217
      PT Multimédia, SGPS, SA                                                                                                                1 005        912
      GALP Energia, SGPS, SA                                                                                                                       -    12 554
      Other                                                                                                                                 12 909       8 130
                                                                                                                                            89 033      72 246




      31. Income and Costs from
      Services and Commissions

      These headings comprise the following:

                                                                                                                                            2005        2004

      Income from services rendered and commissions
      Services rendered                                                                                                                    309 138     267 102
      Guarantees given                                                                                                                      36 290      36 217
      Operations carried out on behalf of third parties                                                                                     12 178      10 291
      Commitments to third parties                                                                                                           4 574      11 031
      Operations on financial instruments                                                                                                      28        1 725
      Other                                                                                                                                 30 782      48 381
                                                                                                                                           392 990     374 747


      Cost of services and commissions
      Banking services rendered by third parties                                                                                            63 495      52 728
      Operations carried out by third parties                                                                                                4 489      11 071
      Operations on financial instruments                                                                                                    2 636       1 468
      Guarantees received                                                                                                                     158         176
      Commitments assumed by third parties                                                                                                     48              7
      Other                                                                                                                                  2 724       9 460
                                                                                                                                            73 550      74 910




232   Notes to the Consolidated Financial Statements | Income from Equity Instruments and Income and Costs from Services and Commissions
32. Results from Financial
Operations

This heading comprises the following:

                                                                                                              2005                               2004

Result of foreign exchange operations
    Revaluation of foreign exchange position                                                                (179 165)                            25 770

Result of financial assets and liabilities held for trading
Securities:
    Debt instruments                                                                                            28 212                           77 885
    Equity instruments                                                                                          15 292                            3 549
    Other                                                                                                       12 198                                   -
                                                                                                                55 702                           81 434
Derivatives:
    Currency                                                                                                  241 988                            (9 602)
    Interest rate                                                                                            (113 797)                         (43 184)
    Shares                                                                                                    (16 322)                         (16 086)
    Credit                                                                                                         (109)                                 -
    Other                                                                                                         5 003                                  -
                                                                                                              116 763                          (68 872)
                                                                                                              172 465                            12 562
Result of financial assets and liabilities at fair value through profit or loss
    Debt instruments                                                                                          (42 810)                            2 381
    Equity instruments                                                                                            4 296                           2 400
    Other                                                                                                       20 899                           (6 246)
                                                                                                              (17 615)                          (1 465)
Result of available-for-sale financial assets
Debt instruments                                                                                                  4 927                           8 766

Equity instruments (Note 8.)
    Unibanco and Unibanco Holdings                                                                            183 923                                    -
    BCP                                                                                                           8 443                          (2 200)
    EDP                                                                                                           8 969                                  -
    Fespect – Serviços de Consultoria, SA                                                                         5 652                                  -
    Other                                                                                                         9 653                           7 253
                                                                                                              216 640                             5 053
Other securities                                                                                                        -                         1 904
                                                                                                              221 567                            15 723
Result of hedging operations
Interest rate swaps                                                                                             58 201                         (93 389)
Futures and other forward operations                                                                            (2 845)                                  -
Value adjustments of hedged assets and liabilities                                                              52 867                                   -
                                                                                                              108 223                          (93 389)
Other                                                                                                           (8 257)                              (12)
                                                                                                              297 218                          (40 811)


The Group records in the “Result of hedging operations”
heading, gains and losses on operations contracted for
hedging purposes but that do not qualify as hedging
operations under IAS 39.




                                                                          Notes to the Consolidated Financial Statements | Results from Financial Operations   233
      33. Other Net Operating
      Income

      This heading comprises the following:

                                                                                     2005        2004


      Other operating income
      Rendering of miscellaneous services                                            43 483      57 487
      Expense reimbursement                                                           7 499       8 578
      Gains on subsidiaries and associates                                             625        4 017
      Operational leasing instalments                                                 6 756      10 383
      Gains on non-financial assets:
          Non-current assets held for sale                                            7 053       3 273
          Other tangible assets                                                       4 455       7 862
          Investment property                                                         2 657        956
          Leased assets                                                                248        3 312
          Other non-financial assets                                                   850         134
      Secondment of employees to Caixa Geral de Aposentações and other entities       6 129       8 956
      Sale of cheques                                                                18 003      19 590
      Other                                                                          11 161      76 446
                                                                                    108 919     200 994


      Other operating costs
      Donations and subscriptions                                                     6 648       5 861
      Loss on subsidiary and associated companies                                           -      655
      Losses on non-financial assets
          Non-current assets held for sale                                             983              -
          Investment property                                                          500        1 996
          Leased assets                                                                 48         576
          Other tangible assets                                                        561        2 915
      Other taxes                                                                    16 082      15 537
      Fines and penalties                                                             1 756             -
      Contribution to the Deposit Guarantee Fund                                     10 893      10 632
      Other                                                                          29 821      81 988
                                                                                     67 292     120 160
                                                                                     41 627      80 834




      The headings “Gains on subsidiaries and associates” and
      “Losses on subsidiaries and associates” for 2004 include
      €1 076 thousand and €302 thousand, respectively,
      relating to the sale of Lusogest and Lusopensiones
      (Note 3.).




234   Notes to the Consolidated Financial Statements | Other Net Operating Income
34. Technical Margin on
Insurance Operations

34.1. Premiums, Net of Reinsurance
This caption for the years 2005 and 2004 is made up as
follows:

                                                                                                       2005                           2004

Caixa Seguros
Direct insurance and inwards reinsurance
 Gross premiums written
   Life insurance                                                                                    998 444                         864 741
   Non-life insurance                                                                             1 628 329                       1 012 091
Outwards reinsurance premiums                                                                       (255 314)                       (141 234)

                                                                                                  2 371 459                       1 735 598
Other                                                                                                   4 767                                  -

                                                                                                  2 376 226                       1 735 598




                                                         Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations   235
      Earned premiums, net of reinsurance, issued by Caixa
      Seguros, are made up as follows:

                                                                                                     2005                                         2004
                                                                     Direct insurance                                       Direct insurance
                                                                        and inwards                Outwards                  and inwards        Outwards
                                                                         reinsurance              reinsurance     Net         reinsurance      reinsurance     Net


      Life Insurance:
           Insurance contracts
               Without profit sharing                                        90 579                (11 666)      78 913          79 087         (22 622)      56 465
               With profit sharing                                           48 213                 (2 480)      45 733          65 780          (1 268)      64 512
          Investment contracts with
          discretionary profit sharing                                     859 652                  (3 528)     856 124        719 874           13 302      733 176
                                                                           998 444                 (17 674)     980 770        864 741          (10 588)     854 153
      Non-life insurance:
      Gross premiums written
          Labour accident                                                  264 599                  (1 054)     263 545        157 029             (443)     156 586
          Personal and passenger accident                                    50 007                (13 563)      36 444          36 552          (9 378)      27 174
          Health                                                           140 860                  (7 331)     133 529          71 070            (385)      70 685
          Fire and other damage                                            290 903                (152 419)     138 484        169 497          (86 803)      82 694
          Motor                                                            734 518                  (1 013)     733 505        497 584           (1 505)     496 079
          Marine, air and transport                                          43 964                (36 375)       7 589          13 016          (8 753)       4 263
          General third party liability                                      37 172                (15 032)      22 140          27 321         (12 799)      14 522
          Credit and guarantees                                              17 132                (10 495)       6 637          12 082          (7 515)       4 567
          Legal protection                                                   12 848                         -    12 848           4 184            (230)       3 954
          Assistance                                                         36 322                   (358)      35 964          23 756          (2 835)      20 921
          Miscellaneous                                                             4                       -           4              -               -             -
                                                                        1 628 329                 (237 640) 1 390 689        1 012 091         (130 646)     881 445
          Total premiums, net of reinsurance                            2 626 773                 (255 314) 2 371 459        1 876 832         (141 234) 1 735 598
      Change in provision for unearned premiums
          Labour accident                                                        112                     6          118             550             (23)         527
          Personal and passenger accident                                     4 446                    764        5 210           1 101             422        1 523
          Health                                                             (2 110)                (1 156)      (3 266)           (221)             64         (157)
          Fire and other damage                                                  437                (2 022)      (1 585)         (4 445)          1 705       (2 740)
          Motor                                                               9 274                    139        9 413          13 429           2 938       16 367
          Marine, air and transport                                              393                  (565)        (172)            844            (979)        (135)
          General third party liability                                       2 413                 (2 016)         397          (1 968)            987         (981)
          Credit and guarantees                                                (104)                   374          270            (820)            747          (73)
          Legal protection                                                     (582)                   (21)        (603)           (477)             27         (450)
          Assistance                                                         (1 603)                   225       (1 378)            684             248          932
          Miscellaneous                                                        (231)                (2 331)      (2 562)               -               -             -
                                                                             12 445                 (6 603)       5 842           8 677           6 136       14 813
      Premiums earned:
          Labour accident                                                  264 711                  (1 048)     263 663        157 579             (466)     157 113
          Personal and passenger accident                                    54 453                (12 799)      41 654          37 653          (8 956)      28 697
          Health                                                           138 749                  (8 487)     130 262          70 849            (321)      70 528
          Fire and other damage                                            290 438                (154 441)     135 997        165 052          (85 098)      79 954
          Motor                                                            743 792                    (874)     742 918        511 013            1 433      512 446
          Marine, air and transport                                          44 357                (36 940)       7 417          13 860          (9 732)       4 128
          General third party liability                                      39 584                (17 048)      22 536          25 353         (11 812)      13 541
          Credit and guarantees                                              17 005                (10 121)       6 884          11 262          (6 768)       4 494
          Legal protection                                                   12 266                    (21)      12 245           3 707            (203)       3 504
          Assistance                                                         34 720                   (133)      34 587          24 440          (2 587)      21 853
          Miscellaneous                                                             4               (2 331)      (2 327)               -               -             -
                                                                        1 640 079                 (244 243) 1 395 836        1 020 768         (124 510)     896 258
          Total                                                         2 638 523                 (261 917) 2 376 606        1 885 509         (135 098) 1 750 411




236   Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations
The changes in the provision for unearned premiums are
recorded in the “Cost of claims – change in other technical
provisions” heading (Note 34.3.).


34.2. Result of Investments Relating to
Insurance Contracts
This caption for 2005 and 2004 is made up as follows:

                                                                      2005                                                    2004
                                                      Life          Non-life                               Life             Non-life
                                                   insurance       insurance            Total          insurance           insurance          Total

Interest                                            79 990          50 809           130 799            113 291             26 930          140 221
Dividends                                           14 072           7 419             21 491              7 098              3 025           10 123
Net realised gains                                  77 437           3 296             80 733             32 219            (7 234)           24 985
Net unrealised gains                                        -           616                616                      -                -                -
Other                                                2 155          10 158             12 313              4 279            19 526            23 805

                                                   173 654          72 298           245 952            156 887             42 247          199 134




34.3. Cost of Claims, Net of
Reinsurance
Following is a breakdown of this heading for the years
2005 and 2004:

                                                                      2005                                                    2004
                                                     Life          Non-life                                  Life           Non-life
                                                   insurance      insurance               Total          insurance         insurance         Total

Caixa Seguros

    Direct insurance and inwards reinsurance
           Claims paid                             476 341          803 780          1 280 121            877 649          556 274       1 433 923
           Change in provision for claims           26 974          110 750            137 724          (431 122)            92 483        (338 639)
                                                   503 315          914 530          1 417 845            446 527          648 757       1 095 284

           Provision for profit sharing             31 616                162            31 778            17 666                116          17 782
           Change in other technical provisions    582 662          (17 110)           565 552            453 884          (11 479)         442 405

                                                  1 117 593         897 582          2 015 175            918 077          637 394       1 555 471

    Balance of outwards reinsurance                (16 153)        (46 176)            (62 329)            (8 254)         (66 049)         (74 303)

           Caixa Seguros sub-total                1 101 440         851 406          1 952 846            909 823          571 345       1 481 168

Other                                                       -        2 643              2 643                       -         1 021            1 021

                                                  1 101 440         854 049          1 955 489            909 823          572 366       1 482 189




                                                                Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations   237
      The cost of claims in Caixa Seguros non-life insurance
      operations, by type of insurance, is made up as follows:

                                                                                                                       2005
                                                                                                    Change                     Change in
                                                                                  Claims          in provision               other technical   Profit
                                                                                    paid           for claims    Sub-total     provisions      sharing     Total

      Direct insurance and inwards reinsurance:
          Labour accident                                                       128 423             36 463       164 886           (112)           -     164 774
          Personal and passenger accident                                          9 988             4 036        14 024         (4 300)         54        9 778
          Health                                                                  95 825             2 563        98 388         (1 141)        100       97 347
          Fire and other damage                                                   86 887              (845)       86 042         (1 071)           -      84 971
          Motor                                                                 427 691             54 513       482 204         (9 085)          7      473 126
          Marine, air and transport                                               12 837             4 715        17 552         (1 031)           -      16 521
          General third party liability                                           15 788             9 785        25 573           (996)           -      24 577
          Credit and guarantees                                                       148             (565)         (417)        (1 727)           -      (2 144)
          Legal protection                                                            765              377         1 142            576            -       1 718
          Assistance                                                              21 794               585        22 379          1 232            -      23 611
          Miscellaneous                                                            3 634              (877)        2 757            545           1        3 303
                                                                                803 780            110 750       914 530        (17 110)        162      897 582

      Outwards reinsurance:
          Labour accident                                                         (1 094)             (679)       (1 773)            (6)           -      (1 779)
          Personal and passenger accident                                         (1 930)           (2 000)       (3 930)          (764)           -      (4 694)
          Health                                                                  (9 370)            9 227          (143)         1 751            -       1 608
          Fire and other damage                                                 (35 936)            17 015       (18 921)         2 022            -     (16 899)
          Motor                                                                   (5 773)              335        (5 438)         4 144            -      (1 294)
          Marine, air and transport                                               (9 562)           (2 153)      (11 715)           565            -     (11 150)
          General third party liability                                           (8 324)           (2 281)      (10 605)         2 016            -      (8 589)
          Credit and guarantees                                                       (49)             533           484             29            -         513
          Legal protection                                                               1            (213)         (212)          (716)           -        (928)
          Assistance                                                                       -              -             -        (2 339)           -      (2 339)
          Miscellaneous                                                           (1 453)              333        (1 120)           495            -        (625)
                                                                                (73 490)            20 117       (53 373)         7 197            -     (46 176)

      Net:
          Labour accident                                                       127 329             35 784       163 113           (118)           -     162 995
          Personal and passenger accident                                          8 058             2 036        10 094         (5 064)         54        5 084
          Health                                                                  86 455            11 790        98 245            610         100       98 955
          Fire and other damage                                                   50 951            16 170        67 121            951            -      68 072
          Motor                                                                 421 918             54 848       476 766         (4 941)          7      471 832
          Marine, air and transport                                                3 275             2 562         5 837           (466)           -       5 371
          General third party liability                                            7 464             7 504        14 968          1 020            -      15 988
          Credit and guarantees                                                         99             (32)           67         (1 698)           -      (1 631)
          Legal protection                                                            766              164           930           (140)           -         790
          Assistance                                                              21 794               585        22 379         (1 107)           -      21 272
          Miscellaneous                                                            2 181              (544)        1 637          1 040           1        2 678
                                                                                730 290            130 867       861 157         (9 913)        162      851 406




238   Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations
                                                                                     2004
                                                         Change                               Change in
                                              Claims   in provision                       other technical             Profit
                                               paid     for claims          Sub-total         provisions             sharing          Total

Direct insurance and inwards reinsurance:
   Labour accident                           93 828       12 086            105 914                (550)                    -      105 364
   Personal and passenger accident            9 965         (523)              9 442            (1 101)                     -         8 341
   Health                                    48 718        1 292             50 010                (414)                    -        49 596
   Fire and other damage                     43 657        7 689             51 346                 228                     -        51 574
   Motor                                    325 903       60 849            386 752           (10 090)                  116        376 778
   Marine, air and transport                  3 798         (562)              3 236            (1 061)                     -         2 175
   General third party liability             11 582       10 622             22 204               1 187                     -        23 391
   Credit and guarantees                         37         (285)               (248)              (155)                    -          (403)
   Legal protection                             665        1 039               1 704                483                     -         2 187
   Assistance                                14 679        1 616             16 295                (696)                    -        15 599
   Miscellaneous                              3 442       (1 340)              2 102                690                     -         2 792
                                            556 274       92 483            648 757           (11 479)                  116        637 394


Outwards reinsurance:
   Labour accident                             (193)        (528)               (721)                 23                    -          (698)
   Personal and passenger accident           (3 385)            53           (3 332)               (422)                    -        (3 754)
   Health                                          -              -                   -             (64)                    -            (64)
   Fire and other damage                    (19 219)    (10 272)            (29 491)            (1 705)                     -      (31 196)
   Motor                                     (3 120)      (4 495)            (7 615)            (2 938)                     -      (10 553)
   Marine, air and transport                 (2 423)          867            (1 556)                979                     -          (577)
   General third party liability             (6 727)      (9 437)           (16 164)               (987)                    -      (17 151)
   Credit and guarantees                        (58)          144                  86                   4                   -              90
   Legal protection                                -              -                   -             (27)                    -            (27)
   Assistance                                      -              -                   -            (248)                    -          (248)
   Miscellaneous                             (2 099)          980            (1 119)               (752)                    -        (1 871)
                                            (37 224)    (22 688)           (59 912)             (6 137)                     -      (66 049)


Net:
   Labour accident                           93 635       11 558            105 193                (527)                    -      104 666
   Personal and passenger accident            6 580         (470)              6 110            (1 523)                     -         4 587
   Health                                    48 718        1 292             50 010                (478)                    -        49 532
   Fire and other damage                     24 438       (2 583)            21 855             (1 477)                     -        20 378
   Motor                                    322 783       56 354            379 137           (13 028)                  116        366 225
   Marine, air and transport                  1 375           305              1 680                (82)                    -         1 598
   General third party liability              4 855        1 185               6 040                200                     -         6 240
   Credit and guarantees                        (21)        (141)               (162)              (151)                    -          (313)
   Legal protection                             665        1 039               1 704                456                     -         2 160
   Assistance                                14 679        1 616             16 295                (944)                    -        15 351
   Miscellaneous                              1 343         (360)                 983               (62)                    -            921
                                            519 050       69 795            588 845           (17 616)                  116        571 345




                                                       Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations   239
      Information on the development of the cost of claims for
      insurance products in which the amount and timing of the
      payments are uncertain and where this uncertainty is
      usually not eliminated within a year, is set out in the
      following tables:


      Type of insurance:                                                                              Labour accident
      Accumulated amounts                                                                             YEAR OF CLAIM
      Accounting Year                                    2001                    2002              2003               2004                2005      Total

      2001                                             161 384                                                                                     161 384
      2002                                             189 831                130 420                                                              320 251
      2003                                             199 621                142 655             142 469                                          484 745
      2004                                             201 435                153 668             143 255            182 519                       680 877
      2005                                             207 368                161 276             155 076            167 619             172 376   863 715

      Total                                            207 368                161 276             155 076            167 619             172 376   863 715

      Accumulated payments made to-date

                                                       149 767                136 747             138 645            125 164              70 199   620 522

      Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                                        57 601                 24 529              16 431             42 455             102 177   243 193

                                                                                                   Provisions for claims prior to 2001             391 921

                                                                                                   Total provision                                 635 114




      Type of insurance:                                                                          Fire and Other Damage
      Accumulated amounts                                                                             YEAR OF CLAIM
      Accounting Year                                    2001                    2002              2003               2004                2005      Total

      2001                                             145 524                                                                                     145 524
      2002                                             148 552                 80 450                                                              229 002
      2003                                             148 756                 85 868              82 113                                          316 737
      2004                                             146 306                 87 491              82 036            111 921                       427 754
      2005                                             145 862                 87 737              85 556            112 070              94 631   525 856

      Total                                            145 862                 87 737              85 556            112 070              94 631   525 856

      Accumulated payments made to-date

                                                       134 209                 82 019              75 608             92 585              42 157   426 578

      Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                                        11 653                   5 718              9 948             19 485              52 474    99 278

                                                                                                   Provisions for claims prior to 2001              43 475

                                                                                                   Total provision                                 142 753




240   Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations
Type of insurance:                                                                Motor
Accumulated amounts                                                         YEAR OF CLAIM
Accounting Year                      2001             2002              2003                   2004                     2005                    Total

2001                               563 211                                                                                                    563 211
2002                               580 703          576 632                                                                                1 157 335
2003                               624 281          600 484          550 502                                                               1 775 267
2004                               640 082          630 630          564 933                554 251                                        2 389 896
2005                               637 346          643 504          579 156                536 454                  498 157               2 894 617

Total                              637 346          643 504          579 156                536 454                  498 157               2 894 617

Accumulated payments made to-date

                                   555 718          535 038          466 498                395 272                  248 445               2 200 971

Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                    81 628          108 466          112 658                141 182                  249 712                  693 646

                                                                        Provisions for claims prior to 2001                                   293 402

                                                                        Total provision                                                       987 048




Type of insurance:                                                      Marine and Transport
Accumulated amounts                                                         YEAR OF CLAIM
Accounting Year                      2001             2002              2003                   2004                     2005                    Total

2001                                 4 336                                                                                                       4 336
2002                                 4 840            4 371                                                                                      9 211
2003                                 4 927            4 168              2 546                                                                  11 641
2004                                 4 729            3 290              2 439                  2 514                                           12 972
2005                                 4 650            3 385              2 527                  2 739                   3 810                   17 111

Total                                4 650            3 385              2 527                  2 739                   3 810                   17 111

Accumulated payments made to-date

                                     4 185            2 972              2 689                  1 606                   2 577                   14 029

Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                       465              413              (162)                  1 133                   1 233                    3 082

                                                                        Provisions for claims prior to 2001                                      2 574

                                                                        Total provision                                                          5 656




                                                                 Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations   241
      Type of insurance:                                                                                    Air
      Accumulated amounts                                                                            YEAR OF CLAIM
      Accounting Year                                    2001                    2002             2003              2004                2005    Total

      2001                                                1 080                                                                                  1 080
      2002                                                1 269                     686                                                          1 955
      2003                                                1 316                     719              607                                         2 642
      2004                                                1 216                     672           1 111              3 117                       6 116
      2005                                                1 065                     667           4 379              2 735              2 506   11 352

      Total                                               1 065                     667           4 379              2 735              2 506   11 352

      Accumulated payments made to-date

                                                          1 099                  1 020            3 345              2 864              1 365    9 693

      Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                                            (34)                  (353)           1 034              (129)              1 141    1 659

                                                                                                  Provisions for claims prior to 2001           13 565

                                                                                                  Total provision                               15 224




      Type of insurance:                                                                           Transport of Goods
      Accumulated amounts                                                                            YEAR OF CLAIM
      Accounting Year                                    2001                    2002             2003              2004                2005    Total

      2001                                                7 026                                                                                  7 026
      2002                                                8 954                  6 685                                                          15 639
      2003                                                8 901                  8 118            4 893                                         21 912
      2004                                                8 762                  7 030            4 320              4 796                      24 908
      2005                                                8 455                  6 876            4 536              5 039              4 272   29 178

      Total                                               8 455                  6 876            4 536              5 039              4 272   29 178

      Accumulated payments made to-date

                                                          7 999                  6 782            4 777              3 790              2 056   25 404

      Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                                             456                     94            (241)             1 249              2 216    3 774

                                                                                                  Provisions for claims prior to 2001            3 925

                                                                                                  Total provision                                7 699




242   Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations
Type of insurance:                                                       Third Party Liability
Accumulated amounts                                                        YEAR OF CLAIM
Accounting Year                      2001             2002             2003                   2004                     2005                     Total

2001                                13 397                                                                                                      13 397
2002                                15 961           12 802                                                                                     28 763
2003                                18 674           19 174           11 948                                                                    49 796
2004                                21 878           17 817           28 066                  13 042                                            80 803
2005                                22 198           19 145           32 492                  16 643                  13 576                  104 054


Total                               22 198           19 145           32 492                  16 643                  13 576                  104 054


Accumulated payments made to-date


                                    14 367           12 549           11 084                  11 202                    4 927                   54 129


Liabilities recognised in the balance sheet (Provision for direct insurance claims)


                                     7 831            6 596           21 408                   5 441                    8 649                   49 925


                                                                       Provisions for claims prior to 2001                                     31 787


                                                                       Total provision                                                         81 712




Type of insurance:                                                Miscellaneous Financial Losses
Accumulated amounts                                                        YEAR OF CLAIM
Accounting Year                      2001             2002             2003                   2004                     2005                     Total

2001                                 1 960                                                                                                       1 960
2002                                 2 062            2 207                                                                                      4 269
2003                                 2 096            2 294             4 783                                                                    9 173
2004                                 2 159            2 385             4 340                  7 095                                            15 979
2005                                 2 111            2 470             4 593                  7 533                    3 938                   20 645

Total                                2 111            2 470             4 593                  7 533                    3 938                   20 645

Accumulated payments made to-date

                                     1 938            2 281             5 164                  6 797                    1 501                   17 681


Liabilities recognised in the balance sheet (Provision for direct insurance claims)

                                       173              189              (571)                    736                   2 437                    2 964

                                                                       Provisions for claims prior to 2001                                          347

                                                                       Total provision                                                           3 311




Note: Payments of claims made in 2000 and preceding
years are being allocated to 2000.




                                                                 Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations   243
      The cost of life insurance claims of Caixa Seguros for 2005,
      excluding profit sharing, by type of insurance, is made up
      as follows:

                                                                                                                   2005
                                                                                                    Change                     Change in
                                                                                    Claims        in provision               other technical
                                                                                     paid          for claims    Sub-total     provisions        Total

      Direct insurance and inwards reinsurance:
             Insurance contracts
               Without profit sharing                                                   866          (216)           650         16 854          17 504
               With profit sharing                                                  28 507           2 726        31 233               -         31 233
             Investment contracts
               with discretionary profit sharing                                  446 968          24 464        471 432        565 808        1 037 240
                                                                                  476 341          26 974        503 315        582 662        1 085 977
      Outwards Reinsurance:
             Insurance contracts
               Without profit sharing                                               (1 054)          1 019           (35)          (271)           (306)
               With profit sharing                                                    (650)        (1 234)        (1 884)              -         (1 884)
             Investment contracts
               with discretionary profit sharing                                    (7 111)        (6 852)       (13 963)              -        (13 963)
                                                                                   (8 815)         (7 067)       (15 882)          (271)        (16 153)
      Net:
             Insurance contracts
               Without profit sharing                                                 (188)            803           615         16 583          17 198
               With profit sharing                                                  27 857           1 492        29 349               -         29 349
             Investment contracts
               with discretionary profit sharing                                  439 857          17 612        457 469        565 808        1 023 277
                                                                                  467 526          19 907        487 433        582 391        1 069 824




244   Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations
34.4. Commissions and Other Income
and Costs Relating to Insurance
Operations
This heading for the years 2005 and 2004 is made up as
follows:



                                                                     2005                                                  2004
                                                    Life           Non-life                                Life         Non-life
                                                 insurance        insurance             Total          insurance insurance                  Total

Technical income:
Charges:
   Outwards reinsurance                           2 887            32 275             35 162             1 742           20 991            22 733
   Co-insurance management charges                  109              1 345              1 454               109            1 345            1 454
   Pension fund management charges                  114                     -              114              114                   -            114

Other technical income
   Other technical income                           101                  73                174                58               73              131

                                                  3 211            33 693             36 904             2 023           22 409            24 432
Technical costs:
Charges:
   Direct insurance operations:
   - Mediation and brokerage charges             (5 342)        (135 321)          (140 663)            (5 214)         (87 043)         (92 257)
   - Collection charges                            (171)          (11 443)           (11 614)               (70)         (7 243)           (7 313)
   - Other                                           85                     -               85          (1 685)             (946)          (2 631)

   Inwards reinsurance operations                        -        (31 345)           (31 345)                   -           (211)            (211)
   Co-insurance management charges                  (11)              (974)              (985)              (11)            (974)            (985)

Other technical costs
   Provision for premiums receivable             (2 681)           21 436             18 755                (21)           5 833            5 812
   Taxes specific to the insurance business      (1 251)          (24 143)           (25 394)             (926)         (15 923)         (16 849)
   Other                                             (9)                (13)               (22)               (9)             (13)             (22)
                                                 (9 380)        (181 803)          (191 183)           (7 936)        (106 520)        (114 456)

   Other                                                                                   238                                             10 107
                                                 (6 169)        (148 110)          (154 041)           (5 913)         (84 111)          (79 917)




                                                             Notes to the Consolidated Financial Statements | Technical Margin on Insurance Operations   245
      35. Staff Costs

      This heading is made up as follows:

                                                                                    2005        2004


      Remuneration of the management and supervisory boards                         10 377       9 826
      Remuneration of the staff                                                    629 925     566 257
      Provision for suspension of labour agreements (Note 36.)                        218      (13 790)
                                                                                   640 520     562 293


      Other charges relating to remuneration                                        53 690      42 357
      Healthcare – CGD (Note 36.)
          Normal cost (Note 36.)                                                    22 182      20 920
          Contributions relating to current staff                                   26 432      25 860
      Pension liability – CGD (Note 36.)
          Impact of the transfer of the liability to Caixa Geral de Aposentações           -   184 855
          Normal cost                                                               48 517      41 014
          Early retirements (Note 36.)                                                686        2 606
      Other pension costs
          Caixa Seguros
               Normal cost (Note 36.)                                                5 790       1 195
               Other                                                                 4 485          90
          Other                                                                      5 767       4 261
      Other mandatory social charges                                                12 440      11 376
                                                                                   179 989     334 534
      Other staff costs                                                             38 631      27 374
                                                                                   859 140     924 201




      The negative amount in the heading “Provision for
      suspension of labour agreements” for 2004 results mainly
      from the decrease of €12 221 thousand due to the
      transfer of liabilities to Caixa Geral de Aposentações (Note
      36.).


      The heading “Remuneration of the staff ” for 2005 and
      2004 includes €26 500 thousand relating to the provision
      for participation in profits of CGD’s employees.


      The heading “Other pensions costs – other” of Caixa
      Seguros for 2005 includes €3 333 thousand relating to
      contributions for the pension funds which was offset by
      reversal of the provision for pensions, therefore not
      affecting net income for the year.




246   Notes to the Consolidated Financial Statements | Staff Costs
The average number of employees of Caixa and
subsidiaries in 2005 and 2004, by function, was as follows:

                                                               2005                                                              2004
                                           Banking           Insurance              Group                Banking              Insurance             Group

Senior management                              301                 344                  645                   280                  128                 408
Management                                   2 391                 919               3 310                 2 532                   529              3 061
Technical staff                              3 666            1 245                  4 911                 3 660                   756              4 416
Administrative staff                         8 587            1 838                10 425                  7 885                1 354               9 239
Auxiliary                                    1 170                 317               1 487                 1 367                   258              1 625

                                           16 115             4 663                20 778                15 724                 3 025              18 749

Number of employees
at the end of the year                     16 040             4 649                20 689                16 060                 3 005              19 065



These numbers at 31 December 2005 and 2004 do not include                disability and survivors’ pensions. These payments
staff employed by the Support Department of Caixa Geral de               comprised a percentage, which increased in line with the
Aposentações (320 in 2005 and 323 in 2004), those assigned               number of years of employment, applied to wage scales
to CGD’s Social Services (72 in 2005 and 2004) and those on              negotiated annually with the bank employees’ unions. In
secondment abroad (102 in 2005 and 103 in 2004).                         2001, following the merger of BNU into CGD, BNU’s
                                                                         pension liability was transferred to CGD. Therefore, the
The increase in the number of employees of the insurance                 former employees of BNU in service at the date of the
business in 2005 results mainly from the acquisition of Império          merger became covered by the pension and benefits plan
Bonança (Note 3.).                                                       in force in CGD. As regards retired personnel and
                                                                         pensioners of BNU at the date of the merger the pension
36. Retirement Pensions and                                              plan in force on the date of their retirement remains
Other Long Term Benefits                                                 applicable.


36.1 Retirement Pensions and Post                                        Under Decree Laws 240-A/2004 of 29 December and
Retirement Death Grants                                                  241-A/2004 of 30 December, on 30 November 2004 the
Liabilities for CGD employees                                            full amount of the retirement pension liability of Caixa’s
In accordance with article 39 of Decree-Law 48,953 of 5 of               employees, relating to time of service up to 31 December
April 1969 and Decree-Law 161/92 of 1 August, CGD was                    2000, totalling €2 510 043 thousand, was transferred to
responsible for the payment of retirement pensions for                   CGA. This transfer also included the liability for death
sickness, disability and old age and survivors’ pensions to              grants after normal retirement age, in respect of the above
employees hired as from 1 January 1992. Caixa Geral de                   mentioned time of service.
Aposentações (“CGA”) was responsible for the payment of
survivors’    pensions   to   employees     hired    prior    to         Accordingly, Caixa’s pensions liabilities at 31 December
1 January 1992. For this purpose 2.5% of the remuneration                2005 and 2004 are as follows:
of these employees is discounted and paid to CGA.
                                                                         - Liability relating to current employees for time of service
In addition, in accordance with the Vertical Labour                       after 31 December 2000;
Collective Agreement in force for the banking sector, the                - In the case of employees retired between 1 January 2001
former BNU had the commitment to grant pensions to its                    and 31 December 2005 the part of the liabilities
employees for early retirement and retirement due to age,                 corresponding to the time of service in that period;




                                                             Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits   247
      - Liability for retirement pensions and respective survivors’                                Império Bonança also undertook to grant employees who
        pensions of former BNU employees, already under                                            were formerly BCP Group pension fund beneficiaries, the
        payment at the date of the merger;                                                         additional benefits guaranteed under the supplementary
      - The liability for death grants relating to the period of                                   plan in force in that Group of which the company was a
        service after 31 December 2000.                                                            member up to 31 December 2004. The liability relating to
                                                                                                   the supplementary plan is covered by the respective
      Pension payments are based on the number of years of                                         pension fund.
      service of the employees and their respective remuneration
      on their retirement date, and are updated in line with the                                   Determination of Liabilities
      wages paid to current employees.                                                             Actuarial calculations have been made by specialised
                                                                                                   entities to determine the liability for retirement pensions
      Caixa set up a pension fund in December 1991, to which                                       under payment and for past service of current employees
      it makes the necessary contributions to cover its pension                                    as at 31 December 2005 and 2004.
      liability. Under the regime applicable to Caixa, employees
      contribute the following percentages of their remuneration
      to the pension fund:


      - Employees hired prior to 1 January 1992                                    7.5%
      - Employees hired after 1 January 1992                                     10.0%


      The full amount contributed by the employees hired after
      1 January 1992 is paid to the pension fund, as the fund is
      responsible for the respective survivors’ pension regime.


      The transfer of liabilities to CGA implied the transfer of an
      equivalent amount of assets from the pension fund.


      Liability Relating to Employees of Companhia
      de Seguros Fidelidade – Mundial, SA and
      Império Bonança – Companhia de Seguros, SA
      Pursuant to the terms of the collective labour agreement
      in force for the insurance sector, Fidelidade - Mundial and
      Império Bonança have assumed the commitment to pay
      their employees hired prior to June 1995 supplementary
      pensions to those attributed by the Social Security. These
      supplementary pensions consist of a percentage which
      increases in proportion to the number of years of service,
      applied to the salary scale in force at the date of their
      retirement. They also assumed the commitment to pay
      pensions         to     employees           taking        early      retirement,
      corresponding to 80% of their current salary up to the
      time they reach normal retirement age.




248   Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits
The assumptions and technical bases used in respect of
CGD and the Group insurance companies were as follows:

                                                           2005                                   2004                         1 January 2004
                                                                     Caixa                                 Caixa                               Caixa
                                                  CGD              Seguros               CGD              Seguros             CGD            Seguros

Actuarial method                                  Projected Unit Credit                  Projected Unit Credit               Projected Unit Credit
Mortality table
    Men                                     TV 73/77             TV 73/77            TV 73/77            TV 73/77         TV 73/77           TV 73/77
    Women                                   TV 88/90             TV 88/90            TV 73/77            TV 73/77         TV 73/77           TV 73/77
Disability table                                           EKV 80                                 EKV 80                              EKV 80
Discount rate                                 4.75%                 4.75%                   5%                 4%              5.5%                 4%
Yeld of funds assets                          5.25%                 4.75%                   5%                 5%              5.5%                 6%
Salary growth rate                                  3%                   3%                 3%                 3%                3%                 3%
Pension growth rate                                 2%                   1%                 2%                 1%                2%                 1%
Turnover rate
    Under 30 years old                              5%                   n/a                5%                 n/a               5%                  n/a
    Between 30 and 40 years old                     1%                   n/a                1%                 n/a               1%                  n/a
    Older than 40                                   0%                   n/a                0%                 n/a               0%                  n/a
Future external service                             1/8                  n/a                1/6                n/a                1/6                n/a



In the studies relating to CGD, for 2005 and 2004, the
normal retirement age was considered to be 60 years of
age.


Following is a comparison between the actuarial and
financial assumptions used to determine CGD’s pension
costs for 2005 and 2004 and the actual amounts:

                                                                                                  2005                               2004
                                                                                  Assumptions              Actual         Assumptions           Actual

Yield of fund assets                                                                    5.25%               9.22%                5%             7.93%
Salary growth rate                                                                          3%              3.81%                3%             3.20%
Pension growth rate                                                                         2%              2.75%                2%             2.75%




                                                          Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits   249
      The Group’s past service liability in accordance with the
      actuarial calculations and the funds and provisions available
      to cover them at 31 December 2005 and 2004 are as
      follows:

                                                                                     2005                                                        2004
                                                          CGD       Caixa Seguros           Other            Total       CGD        Caixa Seguros Other           Total

      Past service liability
          Current employees                           497 465           40 233             17 632          555 330      347 273         20 343      17 712       385 328
          Retired and early
               retired employees                      327 111          218 154             15 311          560 576      297 944         91 945      12 652       402 541
                                                      824 576          258 387             32 943         1 115 906     645 217       112 288       30 364       787 869

      Autonomous pension funds                        824 576          160 269              2 766          987 611      645 217         84 740       2 603       732 560
      Mathematical provisions                                   -       77 745                     -        77 745              -       21 220             -      21 220
      Provision for pensions
           and similar costs                                    -       24 736             30 410           55 146              -        6 428      27 686        34 114
                                                      824 576          262 750             33 176         1 120 502     645 217       112 388       30 289       787 894
          Difference                                            -         4 363                233           4 596              -         100           (75)          25

          Funding level                              100.00%          101.69%           100.71%            100.41%     100.00%       100.09%       99.75%        100.00%


      In accordance with Bank of Portugal Official Notice 4/2005
      of 28 February, financial entities with head office in
      Portugal must fully fund their liability for retired and early
      retired personnel and a minimum of 95% of their past
      service liability for current employees. Caixa’s liability
      at 31 December 2005 and 2004 was fully funded.


      The future service liability for CGD’s current employees at
      31 December 2005 and 2004 totalled €1 199 740 thousand
      and €994 611 thousand, respectively.


      The number of beneficiaries of CGD and the CGD Group
      insurance companies in Portugal in 2005 and 2004 was as
      follows:

                                                                                                                        2005                              2004
                                                                                                                                Caixa                             Caixa
                                                                                                                 CGD           Seguros            CGD            Seguros

      Current employees                                                                                        11 981           2 993            11 782           1 781
      Retired and early retired employees                                                                       6 886           2 601             6 496           1 425
                                                                                                               18 867           5 594            18 278           3 206




250   Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits
The changes in the pension funds, mathematical provisions
and provision for pensions and similar costs in 2004 and
2005 were as follows:

                                                                                             CGD         Caixa Seguros             Other           Total

Balances at 1 January 2004                                                              2 497 086              109 042            26 242        2 632 370

Contributions paid
   Regular contributions
         By the employees                                                                   25 031                       -            158            25 189
         By the entities                                                                    31 552                4 694               399            36 645
   Extraordinary contributions                                                            495 537                        -                -        495 537
Change in provisions for pensions and similar costs                                                 -             1 734             3 764             5 498
Pensions paid                                                                             (91 847)               (8 673)             (380)       (100 900)
Net income of the pension fund                                                            197 901                 7 192               106          205 199
Change in the mathematical provisions                                                               -            (1 601)                  -          (1 601)
Current personnel transferred and to be transferred to the CGA Pension Fund           (2 510 043)                        -                -    (2 510 043)

Balances at 31 December 2004                                                              645 217              112 388            30 289           787 894

Acquisition of Império Bonança                                                                      -          136 487                    -        136 487
Contributions paid
   Regular contributions
         By the employees                                                                   26 139                       -            183            26 322
         By the entities                                                                    23 467               17 864               305            41 636
   Extraordinary contributions                                                              41 115                       -                -          41 115
Change in provision for pensions and similar costs                                                  -            (9 782)            2 687            (7 095)
Pensions paid                                                                             (19 480)             (14 414)              (442)         (34 336)
Net income of the pension fund                                                            108 119                11 766               138          120 023
Change in the mathematical provisions                                                               -             8 440                   -           8 440
Other changes                                                                                     (1)                   1               16                 16

Balances at 31 December 2005                                                              824 576              262 750            33 176        1 120 502



At 31 December 2005 and 2004 CGD’s pension fund was                      Assets in the amount of €1 434 120 thousand were
managed by CGD Pensões – Sociedade Gestora de Fundos                     transferred to CGA up to 31 December 2004. The
de Pensões, SA.                                                          remaining €1 075 923 thousand had been recognised as
                                                                         a liability of the Fund at that date and were settled in
At 31 December 2005 and 2004 CGD’s pension fund had                      2005.
property leased to Group companies for the amount of
€143 431 thousand and €68 158 thousand, and securities
issued     by    Group      companies   in   the      amount   of
€21 933 thousand and €421 541 thousand, respectively.


Contributions to the pension funds in 2005 and 2004 were
made in cash. Part of Caixa’s extraordinary contributions
for 2004 were made in 2005, with value date as of
31 December 2004.




                                                               Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits   251
      The change in the difference between the Group’s past
      service liability and respective coverage, and the
      corresponding impact in the financial statements as at
      31 December 2005 and 2004 are as follows:

                                                                                                             CGD       Caixa Seguros    Other      Total

      Situation as at 31 December 2003                                                                     (24 563)          112        7 598     (16 853)

      Transition impact to IFRS (Note 43.)                                                                (229 139)            6       (7 811)   (236 944)

                                                                                                          (253 702)          118        (213)    (253 797)

      Current service cost                                                                                 (41 960)         (920)        (172)    (43 052)
      Interest cost                                                                                       (148 582)       (4 962)        (107)   (153 651)
      Expected return on plan assets                                                                       149 528         4 687          142     154 357
          Normal cost for the year (Note 35.)                                                              (41 014)       (1 195)        (137)    (42 346)

      Increase in liabilities due to early retirements (Note 35.)                                           (2 606)             -            -     (2 606)
      Other changes in profit or loss                                                                              -            -        (245)       (245)
          Changes with impact in profit or loss                                                            (43 620)       (1 195)       (382)     (45 197)

      Liability                                                                                           (278 140)       (5 379)           1    (283 518)
      Income                                                                                                48 373           133          (37)     48 469
          Actuarial gains and losses                                                                      (229 767)       (5 246)         (36)   (235 049)

      Contributions made                                                                                   527 089         6 422          557     534 068
      Other                                                                                                        -           1           (1)             -

      Situation as at 31 December 2004                                                                             -         100          (75)         25

      Current service cost                                                                                 (51 037)       (4 000)        (185)    (55 222)
      Interest cost                                                                                        (31 720)       (8 667)        (109)    (40 496)
      Expected return on plan assets                                                                        34 240         6 877          133      41 250
          Normal cost for the year (Note 35.)                                                              (48 517)       (5 790)        (161)    (54 468)

      Increase in liabilities due to early retirements (Note 35.)                                             (686)             -            -       (686)
      Other changes profit or loss                                                                                 -            -         (20)        (20)
          Changes with impact in profit or loss                                                            (49 203)       (5 790)       (181)     (55 174)

      Liability                                                                                            (89 256)        3 470             -    (85 786)
      Income                                                                                                73 878        (1 342)           5      72 541
          Actuarial gains and losses                                                                       (15 378)        2 128            5     (13 245)

      Contributions made                                                                                    64 582         7 917          488      72 987
      Other                                                                                                     (1)            8           (4)             3

      Situation as at 31 December 2005                                                                             -       4 363          233       4 596




252   Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits
The impact of transition to IFRS at 1 January 2004 results
from the change in the actuarial assumptions, as follows:

Decrease in discount rate from 6% to 5.5%             191 346
Inclusion of the death grant                           37 793
                                                      229 139




Actuarial gains and losses relating to CGD’s liability in 2005
and 2004 were as follows:

                                                                                                                2005                             2004

Decrease in the discount rate                                                                                   (36 576)                      (228 146)
Change of the mortality table (women)                                                                           (27 507)                                  -
Other actuarial gains and losses                                                                                (25 173)                        (49 994)
                                                                                                                (89 256)                      (278 140)



Healthcare                                                            Other long term benefits
Caixa Geral de Depósitos’ Social Services are responsible for         Caixa pays a bonus to all employees completing ten,
providing healthcare to the current employees and                     twenty and thirty years of effective service, in the year of
pensioners of CGD’s head office. CGD makes an annual                  completion, corresponding to one, two or three months’
payment to the Social Services corresponding to 8.95% of              salary, respectively. It also pays a bonus to employees when
salaries and pensions paid. Caixa also has a liability for            they pass to a situation of retirement, in the amount
contributions to SAMS (Healthcare services) relating to the           corresponding to the proportion of what they would have
employees of the former BNU that retired up to                        received if they continued to be employed, until they
23 July 2001.                                                         complied with the requirements of the following level. The
                                                                      provision recorded for the long service bonus liability at
The past service liability for healthcare was determined based        1 January 2004 totalled €46 591 thousand (Note 43.). The
on actuarial calculations made by specialised entities, using         corresponding liability at 31 December 2005 and 2004
actuarial assumptions similar to those mentioned above                amounted to €44 375 thousand and €45 514 thousand,
relating to the calculation of pension liabilities.                   respectively, and was recognised in the heading “Other
                                                                      liabilities” (Note 25.).
The past service liability at 31 December 2005 and 2004, in
the amount of €399 585 thousand and €316 324 thousand                 Caixa also determines its liability relating to death grants
respectively, is recognised in the heading “Provisions”.              prior to normal retirement age. At 31 December 2005 and
                                                                      2004,         the       corresponding             liability      amounts           to
Império Bonança also assumed the commitment to provide                €2 028 thousand and €2 216 thousand, respectively,
lifelong healthcare benefits to its employees who were                recognised in the “Provisions” heading.
beneficiaries of the former BCP pension fund. This liability is
covered by provisions of €22 101 thousand, as at                      The France branch also pays long term benefits to its
31 December 2005.                                                     employees. The corresponding liability at 1 January 2004
                                                                      amounted to €1 500 thousand.




                                                            Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits   253
      Deferred actuaryal gains and losses
      The changes in deferred actuarial gains and losses and
      deferred costs relating to the introduction of IFRS in
      2004 and 2005 in respect of CGD, are as follows:

                                                                                                          Corridor              Above the corridor
                                                                                               Pensions        Healthcare     Pensions    Healthcare       Total
                                                                                                                                                        (Note 19.)

      Balances at 31 December 2003                                                             252 165                    -    310 039           -        562 204
      Introduction of IFRS - impact on liabilities                                             229 139          285 285               -          -        514 424
          Sub-total impact of transition to IFRS (Note 43.)                                   (481 304)        (285 285)      (310 039)          -     (1 076 628)

      Balances at 1 January 2004                                                                          -               -           -          -                 -

      Actuarial gains and losses for the year                                                  229 767               23 940           -          -        253 707
      Impact of the transfer of liabilities
          to Caixa Geral de Aposentações (Note 35.)                                           (184 855)                   -           -          -      (184 855)

      Balances at 31 December 2004                                                               44 912              23 940           -          -         68 852

      Actuarial gains and losses for the year                                                    15 378              16 018           -    60 337          91 733
      Other                                                                                               -              1            -          -                 1

      Balances at 31 December 2005                                                               60 290              39 959           -    60 337         160 586



      As a result of the above mentioned transfer of liabilities to
      CGA, the part of the actuarial gains and losses relating to
      transferred liabilities was charged to the income statement,
      totalling €184 855 thousand. A gain of €12 221 thousand
      was also recognised, relating to the reversal of liabilities for
      other employee benefits (Note 35.).




254   Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits
Provisions
The provisions for employee benefits at 31 December 2005
and 2004 are made up as follows:

                                                                                                                        2005                           2004

CGD
    Provision for post-employment healthcare                                                                         399 585                         316 324
    Provision for labour suspension agreements                                                                          3 020                           2 736
    Provision for death grant liability                                                                                 2 028                           2 216
    France branch liabilities                                                                                           1 728                           1 806
                                                                                                                     406 361                         323 082
Provision for pension and other liabilities
    Banco Comercial do Atlântico, SA                                                                                   26 541                          24 623
    Caixa Seguros                                                                                                       2 635                           6 428
    Other                                                                                                               3 869                           3 063
Provision for post-employment healthcare
    Caixa Seguros (Império Bonança)                                                                                    22 101                                  -
    Other                                                                                                               3 092                           4 116
Other                                                                                                                   7 120                              526
                                                                                                                     471 719                         361 838



Caixa recorded a specific provision for the impact of the                  The changes in provisions for employee benefits in 2005
change to inactive status of employees with whom it has                    and 2004 are as follows:
entered into labour suspension agreements.

                                                                                                                       2005                            2004

Balance at the beginning of the year                                                                                 361 838                           28 169
Impact of the adoption of IFRS (Note 43.):
    Healthcare – CGD                                                                                                           -                     285 285
    Labour suspension agreements                                                                                               -                       16 526
    Other                                                                                                                      -                        3 622
                                                                                                                               -                     305 433
Provisions recognised as a charge to staff costs:
    Healthcare – CGD (Note 35.)                                                                                        22 182                          20 920
    Labour suspension agreements (Note 35.)                                                                                218                       (11 184)
Actuarial gain and losses in post-employment healthcare liability:
    Change of women’s mortality table                                                                                  11 714                                  -
    Decrease in discount rate from 5% to 4.75%                                                                         13 952                                  -
    Change of contribution rates to “SAMS”                                                                              6 910                                  -
    Other                                                                                                              43 779                          23 940
Other                                                                                                                   2 112                          10 868
                                                                                                                     100 867                           44 544
Acquisition of Império – Bonança (Note 3.)                                                                             28 069                                  -
Net increase recorded by corresponding entry to “Provisions”                                                            7 890                           2 472
Utilisation:
    Payments to “SAMS” and CGD’s Social Services                                                                     (13 821)                        (15 276)
    Other                                                                                                            (13 401)                          (3 504)
Other                                                                                                                      277                                 -
Balance at the end of the year                                                                                       471 719                         361 838




                                                                 Notes to the Consolidated Financial Statements | Retirement Pensions and Other Long Term Benefits   255
      37. Other Administrative
      Costs

      This heading comprises the following:

                                                                                                                                             2005                          2004

      Specialised services                                                                                                                 352 221                       303 975
      Rent                                                                                                                                  62 519                        66 498
      Communication and postage                                                                                                             53 553                        54 015
      Maintenance and repairs                                                                                                               47 012                        47 622
      Advertising and publications                                                                                                          45 074                        42 564
      Water, energy and fuel                                                                                                                18 183                        16 425
      Transport of values and other                                                                                                         17 732                          6 536
      Travel, lodging and representation expenses                                                                                           16 314                        14 528
      Standard forms and office supplies                                                                                                      9 938                       11 475
      Other                                                                                                                                 21 011                        20 321
                                                                                                                                           643 557                       583 959



      38. Asset Impairment

      The changes in impairment in 2005 and 2004 were as
      follows:

                                                                                                                   2005
                                                                                                                                                                      Recovery of
                                             Balance at Aquisition of Adoption                                                  Exchange    Transfers   Balance at   credit, interest
                                             31.12.2004    subsidiaries    of IAS 39 Additions Reversals           Write-offs   differences and other   31.12.2005   and expenses
                                                                          (Note 43.)

      Impairment of loans and advances
      to customers (Note 11.)                1 210 737               -      42 292      667 259     (370 065)      (146 326)      3 494      (6 072)    1 401 319       (44 775)

      Impairment of loans and advances
      to credit institutions (Note 6.)            6 219              -            -        5 417         (9 152)          (8)         -      (1 586)          890               -

      Impairment of other tangible assets
      (Note 14.)                                16 752               -            -             -          (828)            -         -         194        16 118               -

      Impairment of non-current
      assets held for sale
      and other assets (Notes 12. and 19.)     118 762         62 270             -       34 300         (5 418)    (25 956)          -      (4 151)      179 807               -
                                               141 733         62 270             -       39 717     (15 398)       (25 964)          -      (5 543)      196 815               -
                                             1 352 470         62 270       42 292      706 976     (385 463)      (172 290)      3 494     (11 615)    1 598 134       (44 775)




      Notes to the Consolidated Financial Statements | Other Administrative Costs and Asset Impairment
256
                                                                                                     2004
                                                                                     Charges to
                                                                                     reserves and                                                             Recovery of
                                        Balance at Adoption                            retained                   Exchange       Transfers     Balance at   credit, interest
                                        31.12.2003   of IFRS   Additions Reversals    earnings      Write-offs differences      and other     31.12.2004     and expenses

Impairment of loans and advances
to customers (Note 11.)                 1 257 080         -    608 720   (339 504)            -     (280 823)        1 614       (36 350)      1 210 737       (43 583)

Impairment of loans and advances
to credit institutions (Note 6.)           26 292         -     16 324    (36 903)            -       (7 490)          (15)         8 011           6 219

Provisions for investments                 89 489         -     18 015    (20 332)     711 159      (512 353)        2 846               -       288 824               -

Provisions for losses on
investment securities                     396 687         -     49 765    (59 441)            -      (72 235)      (4 269)       (19 308)        291 199               -

Impairment of other tangible assets
(Note 14.)                                      -    16 496          1       (378)            -               -           -           633          16 752              -

Impairment of non-current assets held
for sale and other assets
(Notes 12. and 19.)                       131 701         -     67 548    (55 491)            -      (26 557)            8          1 553        118 762               -
                                          644 169    16 496    151 653   (172 545)     711 159      (618 635)      (1 430)        (9 111)        721 756               -
                                        1 901 249    16 496    760 373   (512 049)     711 159      (899 458)          184       (45 461)      1 932 493       (43 583)




The provisions for investments and for losses in investment                            In 2004 provisions recorded by charge to reserves and
securities at 1 January 2005 were deducted from the balance of                         retained earnings in accordance with the previous
the corresponding assets in the adoption of IAS 39 (Note 2.6. e)).                     accounting standards, were as follows:


In 2005 the “Impairment of other assets net of reversals and                           Sale of the investment in BCP (Note 8.)                                   375 884

recovery” reflected in the income statement, includes                                  Sale of the investment in EDP (Note 8.)                                   136 244

€8 103 thousand referring to impairment of available-for-sale                          Other                                                                          225

financial assets, of which €5 095 thousand refers to                                                                                                             512 353

impairment recognised by Caixa in the investment in
PT Multimédia, SGPS, SA.


Full provision for losses at 31 December 2003 (Note 8.)

     BCP                                                             622 133

     EDP                                                             141 863

Reversal of provisions by credit to retained

earnings (Note 8.)
     BCP                                                             (10 156)

     EDP                                                             (27 962)

Reversals net of provisions under the terms

of the transitory regime of Notice 4/2002 (Note 8.)                  (14 719)

                                                                     711 159




                                                                                                            Notes to the Consolidated Financial Statements | Asset Impairment   257
      39. Segment Reporting                                                             and    property     funds     and     discretionary    wealth
                                                                                        management funds;
      In compliance with IAS 14, the Group adopted the
      following business segments:                                                     - Other: includes all segments not covered in the above
                                                                                        business lines, subject to the following rules:
      - Insurance business: includes the operations of the Caixa                        - Net operating income does not exceed 25% of the
        Seguros Group insurance companies and Garantia –                                  product of the overall activity;
        Companhia de Seguros de Cabo Verde, SA. This business                           - Operating       income,     which     includes      interest,
        segment was divided into life and non-life insurance;                             commissions, income from securities and gains on
                                                                                          financial operations, does not exceed 10% of total
      - Corporate finance: includes the activities relating to                            operating income;
        acquisitions,        mergers,         restructuring,         privatisations,    - Operating       expenses,    which      include     interest,
        subscription and placement of securities (primary market),                        commissions and losses on financial operations, do not
        securitisation, preparation and organisation of syndicated                        exceed 10% of total operating expenses.
        loans (merchant banking – loan placement), investment
        management,             financial       analysis      of     markets   and
        companies and advisory services;


      - Trading and sales: comprises banking activity relating to
        the management of the securities portfolio, management
        of issued debt instruments, money and foreign exchange
        markets operations, repo and security loan operations
        and wholesale brokerage. Loans and advances to other
        credit institutions and derivative instruments are also
        included in this segment;


      - Retail banking: comprises banking operations with
        individuals, businessmen and micro-companies. This
        segment also includes consumer finance, mortgage
        lending, credit cards and deposits taken from private
        customers;


      - Commercial banking: includes the granting of loans
        and taking of resources from large companies and SMEs.
        This segment also includes loans, current accounts,
        investment project financing, discounting bills, venture
        capital, factoring, equipment and property leasing,
        syndicated loans underwriting, as well as loans to the
        Government sector;


      - Investment Fund Management: includes activities
        relating to the management of open or closed unit trust




      Notes to the Consolidated Financial Statements | Segment Reporting
258
The results for 2005, distributed by business segment and
geographic market, are as follows:


Business segment
                                                                                                               2005
                                                                                                Investment
                                                     Trading         Retail        Commercial      Fund      Corporate     Insurance       Insurance
                                                    and sales       Banking         Banking     Management    Finance        (Life)        (Non-life)      Other        Total


Interest and similar income                         1 116 287      1 230 428        749 402          577       6 474        165 861            801         8 059     3 277 889
Interest and similar costs                         (1 144 007)     (283 262)       (390 600)          (1)          -        (86 870)        (2 887)       (4 833) (1 912 460)
Income from equity instruments                           84 429           83            106        3 039           -                  -           -        1 376        89 033
Income from services rendered and commissions            31 039     150 521         108 445       65 811      15 158                  3           -       22 013       392 990
Cost of services and commissions                         (5 979)    (40 768)         (9 310)      (2 731)       (12)         (4 827)        (1 907)       (8 016)      (73 550)
Results from financial operations                       269 354       6 761            7 501       1 864        191           4 522            152         6 873       297 218
Other net operating income                               (9 428)     31 483          19 693          (49)     18 927         (4 532)       (11 981)       (2 486)       41 627
Premiums net of reinsurance                                    -              -            -            -          -        985 536       1 390 690             -    2 376 226
Result of investments relating to insurance contracts          -              -            -            -          -        245 952               -             -      245 952
Claims cost net of reinsurance                                 -              -            -            -          -     (1 103 844)      (851 645)             - (1 955 489)
Commissions and other income and costs
relating to insurance operations                               -              -            -            -          -      (154 041)               -             -    (154 041)
Net operating income from banking
and insurance operations                                341 695    1 095 246        485 237       68 510      40 738         47 760        523 223        22 986     2 625 395
Other costs and income                                                                                                                                              (2 087 728)
Net income attributable to
the shareholder of CGD                                                                                                                                                 537 667


Cash balances and loans and advances
to credit institutions (net)                       11 693 161                 -            -          10           -        156 875               -             - 11 850 046
Investments in securities and derivatives (net)     9 906 189       240 376         114 166       52 460           -      6 827 030       1 836 112      591 302 19 567 635
Loans and advances to customers (net)                          - 30 282 275       19 348 018            -    295 291          4 585          5 756             6 49 935 931
Tecnical provision for outwards reinsurance                    -              -            -            -          -         20 222        211 706              -      231 928
Total net assets                                   21 599 351 30 522 651          19 462 184      52 470     295 291      7 008 711       2 053 574     5 467 106 86 461 338
Resources of central banks
and credit institutions                             4 382 863                 -            -            -          -          1 622          1 378              -    4 385 863
Customer resources                                             - 42 925 818        5 010 406            -     20 526      2 205 213               -             - 50 161 963
Debt securities                                    10 298 612      1 353 425               -            -          -                  -           -             - 11 652 037
Technical provisions for outwards reinsurance                  -              -            -            -          -      4 576 033       2 434 407             -    7 010 440
Liability to subscribers of unit-linked products               -              -            -            -          -        669 222               -             -      669 222




                                                                                                             Notes to the Consolidated Financial Statements | Segment Reporting   259
                                                                                                                    2004
                                                                                                     Investment
                                                           Trading         Retail       Commercial      Fund      Corporate   Insurance      Insurance
                                                           and sales      Banking         Banking    Management    Finance      (Life)       (Non-life)    Other         Total


      Interest and similar income                          836 370       1 115 478        770 862         645       5 837      106 423          1 274         214     2 837 103
      Interest and similar costs                          (735 660)      (313 621)       (343 937)         (2)       (396)     (97 616)          (218)        (17) (1 491 467)
      Income from equity instruments                          67 742         1 769               -         45                      630               -      2 060        72 246
      Income from services rendered and commissions           31 411      171 364          47 194      57 687      15 449          307               -     51 335       374 747
      Cost of services and commissions                        (8 898)     (43 059)         (3 675)     (2 585)     (1 233)        (196)          (788)    (14 476)      (74 910)
      Results from financial operations                    (52 961)          5 980           4 345        (18)       (350)         (48)          (830)      3 071       (40 811)
      Other net operating income                                (185)        2 951         34 245          11          76         (165)         2 000      41 901        80 834
      Premiums net of reinsurance                                   -               -            -           -           -     854 152        881 446            -    1 735 598
      Result of investments relating to insurance contracts         -               -            -           -           -     199 134               -           -      199 134
      Claims cost net of reinsurance                                -               -            -           -           -    (910 844)      (571 345)           - (1 482 189)
      Commissions and other income and costs
      relating to insurance operations                              -               -            -           -           -     (79 917)              -           -      (79 917)
      Net operating income from banking
      and insurance operations                             137 819        940 862         509 034      55 783      19 383       71 860        311 539      84 088     2 130 368
      Other costs and income                                        -               -            -           -                                                       (1 907 459)
      Net income attributable to
      the shareholder of CGD                                                                                                                                            222 909
      Cash balances and loans and advances
      to credit institutions (net)                        9 909 212                 -            -          2            -      38 886               -           -    9 948 100
      Investments in securities and derivatives (net)     9 900 263       257 606         288 698      42 591     416 608     4 926 142      1 039 714    601 589 17 473 212
      Loans and advances to customers (net)                         -   27 578 656      19 171 191           -    130 211        3 466          5 235           6 46 888 765
      Tecnical provision for outwards reinsurance                   -               -            -           -           -      10 126        136 248            -      146 375
      Total net assets                                   19 809 477     27 836 262      19 459 889     64 495     546 819     4 968 495      1 044 949 4 624 128 78 354 514
      Resources of central banks
      and credit institutions                             3 738 544                 -            -           -           -         977            563            -    3 740 084
      Customer resources                                            -   41 729 667       4 343 921           -     23 265     1 766 636              -           - 47 863 489
      Debt securities                                    11 070 325      1 416 171               -           -           -               -           -           - 12 486 496
      Technical provisions for outwards reinsurance                 -               -            -           -           -    2 918 015      1 392 356           -    4 310 372
      Liability to subscribers of unit-linked products              -               -            -           -           -      31 098               -           -       31 098




      Notes to the Consolidated Financial Statements | Segment Reporting
260
Geographic Markets
                                                                                                      2005
                                                                   Rest of                                                                       Rest
                                                                  European   Rest of      North       Latin                                     of the
                                                     Portugal      Union     Europe      America     America        Asia          Africa        World           Total


Interest and similar income                         2 808 037     293 276      904       38 677        599         39 608         82 621        14 167       3 277 889
Interest and similar costs                         (1 453 391)   (332 213)    (465)     (40 718)          -      (41 361)        (38 011)       (6 301) (1 912 460)
Income from equity instruments                         84 863       3 477         -            -          -           583            110                -       89 033
Income from services rendered and commissions         318 501      38 560      345        1 541           -        10 745         22 185         1 113         392 990
Cost of services and commissions                      (63 120)     (5 732)     (74)         (87)          -        (3 499)          (959)          (79)        (73 550)
Results from financial operations                     250 867      29 640        1        1 816           -         6 880          7 663           351         297 218
Other net operating income                             46 197        (497)     (20)         (85)       198          3 299         (7 426)          (39)         41 627
Premiums net of reinsurance                         2 371 459            -        -            -          -                -       4 767                -    2 376 226
Result of investments relating
to insurance contracts                                245 952            -        -            -          -                -               -            -      245 952
Claims cost net of reinsurance                     (1 952 845)           -        -            -          -                -      (2 644)               - (1 955 489)
Commissions and other income
and costs relating to insurance operations          (152 195)      (2 279)        -            -          -           (37)           470                -    (154 041)
Net operating income from banking
and insurance operations                            2 504 325      24 232      691        1 144        797         16 218         68 776         9 212       2 625 395
Other costs and income                                                                                                                                      (2 087 728)
Net income attributable to
the shareholder of CGD                                                                                                                                         537 667
Cash balances and loans and advances
to credit institutions (net)                       10 006 997     403 709     1 831     742 046         70       276 861         214 231       204 301 11 850 046
Investments in securities and derivatives (net)    17 284 949    1 567 200     389      379 256           -        16 899        290 376        28 566 19 567 635
Loans and advances to customers (net)              44 777 183    3 678 679   17 108     234 394           -      534 631         549 241       144 695 49 935 931
Tecnical provision for outwards reinsurance           229 358            -        -            -          -                -       2 569                -      231 928
Total net assets                                   76 792 686    5 729 054   19 837    1 357 130     7 256     1 025 677       1 151 887       377 811 86 461 338
Resources of central banks
and credit institutions                             3 238 975     197 448        2      875 798           -        13 316         17 718        42 606       4 385 863
Customer resources                                 43 343 771    2 818 572   33 375     139 688           -    2 510 207         948 430       367 920 50 161 963
Debt securities                                     4 097 169    6 916 124        -     503 863           -                -     134 881                - 11 652 037
Technical provisions for outwards reinsurance       6 672 642     330 694         -            -          -           483          6 621                -    7 010 440
Liability to subscribers of unit-linked products      669 222            -        -            -          -                -               -            -      669 222




                                                                                                   Notes to the Consolidated Financial Statements | Segment Reporting     261
                                                                                                          2004
                                                                         Rest of                                                                   Rest
                                                                        European   Rest of      North     Latin                                   of the
                                                           Portugal      Union      Europe     America   America        Asia        Africa        World           Total




      Interest and similar income                         2 344 499     358 558      811       18 896         82       23 739       73 493        17 025       2 837 103
      Interest and similar costs                         (1 042 965)   (375 050)    (415)     (20 164)            -   (11 497)     (34 614)       (6 762) (1 491 467)
      Income from equity instruments                         56 150        1 037        -            -    12 232          278        2 549                -       72 246
      Income from services rendered and commissions         312 152      32 496      289          852             -     7 003       21 185           770         374 747
      Cost of services and commissions                      (60 700)     (5 276)     (71)        (217)            -    (2 056)      (6 516)          (74)        (74 910)
      Results from financial operations                     (60 822)     10 442         -       2 029      (136)        3 737        4 028           (89)        (40 811)
      Other net operating income                             96 162     (19 261)     (16)         (53)        (8)       1 797        2 282           (69)         80 834
      Premiums net of reinsurance                         1 735 598            -        -            -            -            -             -            -    1 735 598
      Result of investments relating
      to insurance contracts                                199 134            -        -            -            -            -             -            -      199 134
      Claims cost net of reinsurance                     (1 482 189)           -        -            -            -            -             -            - (1 482 189)
      Commissions and other income
      and costs relating to insurance operations            (79 917)           -        -            -            -            -             -            -      (79 917)
      Net operating income from banking
      and insurance operations                            2 017 102        2 946     598        1 343     12 170       23 001       62 407        10 801       2 130 368
      Other costs and income                                                                                                                                  (1 907 459)
      Net income attributable to
      the shareholder of CGD                                                                                                                                     222 909


      Cash balances and loans and advances
      to credit institutions (net)                        8 469 175     482 832      719      388 546         72      362 057      199 704        44 995       9 948 100
      Investments in securities and derivatives (net)    14 881 594    1 479 010        -     360 253    416 659       41 527      262 922        31 247 17 473 212
      Loans and advances to customers (net)              42 196 855    3 457 142   13 988     293 735             -   368 748      420 763       137 534 46 888 765
      Tecnical provision for outwards reinsurance           145 686            -        -            -            -            -       689                -      146 375
      Total net assets                                   69 180 515    5 593 674   15 060    1 043 244   420 847      922 917      964 313       213 944 78 354 514
      Resources of central banks
      and credit institutions                             2 872 069     302 717        8      539 373             -     8 918       16 999                -    3 740 084
      Customer resources                                 42 658 397    2 847 202   30 656      78 172         (1) 1 093 785        787 022       368 256 47 863 489
      Debt securities                                     5 119 934    6 778 416        -     482 195             -            -   105 951                - 12 486 496
      Technical provisions for outwards reinsurance       3 984 531     321 214         -            -            -       243        4 384                -    4 310 372
      Liability to subscribers of unit-linked products       31 098            -        -            -            -            -             -            -       31 098




      Notes to the Consolidated Financial Statements | Segment Reporting
262
40. Related Parties

Associated companies, the management boards of Group
companies’ and other entities controlled by the Portuguese
State are considered as related parties to the Group.


 The Group’s financial statements at 31 December 2005 and
2004 include the following balances and transactions with
related parties, excluding management boards:

                                                                                           2005
                                                                    The                   Other
                                                               Portuguese             Portuguese
                                                                   State                  State
                                                                (Treasury)               entities            Associates

Assets:
Bonds and other securities                                       634 126                            -         495 956
Loans and advances to customers                                  403 356               2 236 321              255 283
Provisions for loans / Impairment                                          -                        -            8 316
Other assets                                                       53 200                  24 204             352 362

Liabilities:
Customer resources                                             1 047 717               1 388 327               14 069
Other liabilities                                                      145                 44 070                   373

Guarantees given                                                         43                40 766              73 300
Income:
Interest and similar income                                        20 412                  62 291              13 697
Gains from financial operations                                      1 157                          -               832
Income from services rendered and charges                                  -                        1               371
Insurance premiums                                                   1 694                          -                  5
Other operating income                                                     -                        -          12 393

Costs:
Interest and similar costs                                           9 044                 11 510                   385
Losses from financial operations                                     6 981                          -               433
Other operating costs                                                      2                        -            1 131




                                                             Notes to the Consolidated Financial Statements | Related Parties   263
                                                                                                                                            2004
                                                                                                                             The           Other
                                                                                                                        Portuguese       Portuguese
                                                                                                                             State         State
                                                                                                                         (Treasury)       entities       Associates

      Assets:
      Bonds and other securities                                                                                          443 072                    -           6
      Loans and advances to customers                                                                                                -          118          1 384
      Provisions for loans / Impairment                                                                                              -      22 623                -
      Other assets                                                                                                           58 372         30 117         188 508

      Liabilities:
      Customer resources                                                                                                  585 593        1 107 884           2 770
      Other liabilities                                                                                                              -               -          59

      Guarantees given                                                                                                               -               -      42 000
      Income:
      Interest and similar income                                                                                             1 627                  -       6 579
      Gains from financial operations                                                                                        10 405                  -            -
      Income from services rendered and charges                                                                                      -               1         600
      Other operating income                                                                                                         -               -         313

      Costs:
      Interest and similar costs                                                                                             12 979           9 268            755
      Losses from financial operations                                                                                        6 086                  -            -



      The above amounts correspond only to Caixa’s non-                                                41. Disclosures Relating to
      consolidated operations and were extracted from the main                                         Financial Instruments
      business applications and therefore they do not represent
      the full detail of all transactions with these entities.                                         Management Policies on Financial Risks
                                                                                                       Pertaining to the Group’s Activity
      Transactions with related parties are generally made based                                       In 2001 CGD adopted a centralised risk management
      on market values on the respective dates.                                                        model. This encompasses the assessment and control of all
                                                                                                       the Group’s credit, market and liquidity risks, based on the
      Management Boards                                                                                principle of the segregation of functions between the
      In 2005 costs incurred with remuneration and other                                               commercial and risk areas.
      benefits attributed to the Boards of Directors of Caixa and
      Group companies amounted to €12 650 thousand                                                     Credit Risk
      (€11 562 thousand in 2004).                                                                      CGD’s approach to credit risk involves the production of
                                                                                                       risk opinions and the control of portfolio credit risk, which
      In addition, in 2005 and 2004 indemnities of €2 740 thousand                                     includes an analysis of the projected financial evolution of
      and €1 306 thousand were attributed for termination of                                           the projects and influence and perception of factors which
      mandates.                                                                                        may aggravate risk.


      Loans granted to the members of the Boards of Directors
      at 31 December 2005 and 2004 totalled €1 593 thousand
      and €1 458 thousand, respectively.




      Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments
264
Risk assessment, both in lending and off-balance sheet                 with the respective entity/customer’s risk level and capacity
items, is based on a systematic analysis of the following              to take on debt. Counterparty risk is also monitored and
factors:                                                               control is exercised over exposure and the limits allocated.
- Transparency and quality of the available financial
 information;                                                          An internal rating model for credit institutions is currently
- Management quality, operating efficiency, influence of               being developed, which will enable improvements to be
 the   environment     of     the   customer   or   risk    and        made to portfolio analysis and more stringent assessment
 market/competitive         position,   geographical       area,       procedures to be established.
 operating sector, contingencies, relationship with CGD
 and the banking sector, enabling both the endogenous                  Credit risk monitoring is focused on the assessment of the
 and exogenous risks to be identified;                                 principal indicators, the portfolio being divided by product,
- Quality of the proposed operation, notably purpose,                  customer segment, decision-making structure, level of
 maturity period, guarantees, liability sharing, collateral,           financial        system         exposure,          operating          sector        and
 foreign exchange risk, etc..                                          geographical area. The amount of the exposure in relation
                                                                       to the Major Risk limits under the established regulatory
The following specific criteria apply to the assessment of             guidance is also analysed.
economic groups:
- Consideration of external credit risk ratings;                       Daily and monthly reports on overdue credit, by product
- Consideration of credit risk in respect of various group             and customer type, are produced and sent to the
 areas/companies;                                                      commercial areas.
- Concentration of exposure;
- Major Risk limits from a regulatory standpoint, as regards           Market Risk
 its impact on equity and solvency ratio.                              The CGD Group’s market risk management rules
                                                                       established for each portfolio or business unit, include
An internal risk rating model using methodology common                 market risk limits, and exposure limits regarding credit risk,
to the Group as a whole, is also used for risk assessment              market and liquidity risk, required level of return, types of
and as a decision-making tool. This comprises ratings for              instruments authorised and maximum loss levels allowed.
the larger companies and economic Groups and a scoring
system for the individual customers segment.                           The definition of such rules comprises the final stage of the
                                                                       procedures used to obtain relevant risk assessment
Risk assessments of financial institutions are based on in-            information, revised rules for managing the trading (head
house regulations, particularly a definition of exposure risk          office) and investment (the Group) portfolios, as well as
per counterparty, supported not only by rating information             foreign exchange risk, having been approved in 2005.
but also other quantitative and qualitative criteria. The
market and economic environment in which they operate,                 Trading functions and risk control functions are completely
shareholder quality and other credit risk mitigating factors           segregated.
are also taken into account.
                                                                       Risk hedging operations are decided by portfolio managers
The above rules were incorporated into a risk assessment               or business unit managers, based on risk limits and
methodology, designed not only to allocate limits to such              authorised instruments, in which the risk management area
counterparties but also to be fed into the computer                    collaborates on assessing the impact of hedging the total
systems, permitting an analysis of the risks incurred by each          risk incurred or changing the authorised market risk levels,
entity, business unit or at the consolidated level. Limits are         if deemed advisable under the circumstances.
allocated by counterparty, maturity and product, in line




                                                                   Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments   265
                                                                                                       Liquidity Risk
      The market risk measurement used for all types of market
      risk is Value at Risk (VaR) (interest rates, shares, exchange                                    The main purpose of asset-liability management (ALM) is to
      rates, volatility), using the historical simulation method, in                                   ensure prudent liquidity management, capital use and
      which the confidence levels used in the simulation depend                                        control of associated financial risks. This particularly
      on the objectives of retaining the portfolio. In addition,                                       includes interest rate, market and liquidity risks.
      other market risk measurements, such as sensitivity to price
      changes of the underlying assets (basis point value (bpv),                                       Interest rate risks occur whenever CGD, during the course
      for interest rates) and other sensitivity indicators commonly                                    of its operations, is a party to operations in which future
      used for option portfolios (greeks). Stress testing                                              financial flows are sensitive to interest rate changes.
      assessments have also been developed to assess the impact
      on results of extreme changes in risk factors.                                                   The risk measurement methodology used by CGD involves
                                                                                                       the grouping of sensitive assets and liabilities into fixed
      VaR measurement is subject to daily theoretical and real                                         time intervals, by interest repricing dates. Asset and liability
      backtesting analyses with the calculation of theoretical                                         cash flows and the corresponding interest rate risk gap are
      backtesting amounts, real backtesting calculations being                                         calculated for such intervals.
      made monthly. The number of exceptions obtained,
      namely the number of times theoretical or real losses                                            To monitor the effect of the above mentioned gaps on
      exceed VaR, enable the accuracy of the method used to be                                         financial margin, periodic monthly projections of interest
      assessed and any necessary adjustments to be made. In                                            sensitive assets and liabilities are produced, which include
      2005 work began on an analysis of the results of the                                             relevant banking activity trends and evolution of the
      internal market risk models to calculate solvency                                                different market rates and expectations reflected in the
      requirements for hedging such risk and its respective                                            yield curve.
      comparison with the method currently in use.
                                                                                                       Interest rate risk on the banking portfolio is also calculated
      Exchange Risk                                                                                    for consolidated operations every six months and
      Exchange risk is controlled and assessed on a daily,                                             encompasses all balance sheet and off-balance sheet
      individual basis for domestic operations and for each                                            operations not included in the trading portfolio.
      branch and subsidiary, and fortnightly, on a consolidated                                        Assessment and measurement of this type of risk is based
      basis, for the Group as a whole. VaR amounts and limits                                          on the accumulated impact on instruments sensitive to
      are calculated, as well the exposure (total and by currency)                                     interest rates, resulting from a parallel movement of
      which were reviewed in 2005. The more significant                                                +/- 200 b.p. on the yield curve (in accordance with Bank of
      changes include the frequency of assessment and control                                          Portugal Instruction 19/2005).
      which is now performed on a daily basis, for each Group
      company, with all foreign currency investments being
      included in the limits.




      Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments
266
Foreign exchange risk
Financial instruments at 31 December 2005, broken down
by currency, are as follows:

                                                                                                                   Currency
                                                                                                     Pounds                                     Book value
                                                                  Euros            US Dollars        Sterling         Yen         Other        of derivatives      Total

Assets
Cash and cash equivalents at central banks                     1 792 430                7 496              94           122       188 758                -      1 988 900
Cash balances at other credit institutions                       484 581               21 404          6 247         12 420        81 793                -       606 445
Loans and advances to credit institutions                      5 377 559           2 437 562         442 286        323 981       674 203                -      9 255 591
Financial assets at fair value through profit or loss          6 955 512             217 184          20 397                -      49 656        351 984        7 594 733
Available-for-sale financial assets                           10 412 476             413 066           6 433                -     272 485                -    11 104 460
Hedging derivatives                                                       -                  -               -              -             -      199 186         199 186
Loans and advances to customers                               49 604 382             634 113         101 735          3 676       993 344                -    51 337 250
Investments in associates                                        306 987                   66                -              -       1 213                -       308 266
Provisions and impairment                                     (1 307 814)            (15 239)         (3 291)          (175)      (75 690)               -    (1 402 209)

                                                              73 626 113           3 715 652         573 901        340 024     2 185 762        551 170      80 992 622

Liabilities
Resources of central banks and other credit institutions      (1 785 455)         (2 313 147)        (99 431)       (20 341)    (167 489)                -    (4 385 863)
Customer resources                                           (46 831 896)         (1 266 013)        (47 914)     (130 685) (1 885 455)                  -   (50 161 963)
Debt securities                                               (8 678 032)         (1 453 037)      (789 852)      (550 675)     (180 441)                -   (11 652 037)
Financial liabilities at fair value through profit or loss                -                  -               -              -             -     (352 948)       (352 948)
Hedging derivatives                                                       -                  -               -              -             -     (414 529)       (414 529)
Other subordinated liabilities                                (1 659 654)            (42 644)                -              -             -              -    (1 702 298)
Consigned resources                                           (2 520 093)                    -               -              -      (5 206)               -    (2 525 299)

                                                             (61 475 130)         (5 074 841)      (937 197)      (701 701) (2 238 591)        (767 477) (71 194 937)

Derivatives
Currency forwards                                               (125 961)               1 762         (2 609)          (139)      (10 563)               -      (137 510)
Currency swaps                                                (1 223 857)          1 765 281          33 225      (312 458)     (190 507)                -         71 684
Interest rate swaps                                             (665 833)              41 213        364 545        539 195        30 991                -       310 111
Futures                                                       (1 635 807)              (1 695)               -              -             -              -    (1 637 502)
Options                                                           60 474                1 967                -              -      59 815                -       122 256
Caps & Floors                                                   (258 550)                    -               -              -             -              -      (258 550)

                                                              (3 849 534)          1 808 528         395 161        226 598     (110 264)                -   (1 529 511)

Net exposure                                                   8 301 449             449 339          31 865      (135 079)     (163 093)      (216 307)        8 268 174




                                                                              Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments   267
      Liquidity Risk
      Liquidity risk corresponds to the risk of CGD having
      difficulty in obtaining sufficient funds to meet its
      commitments. Liquidity risk may, for example, be reflected
      in Caixa’s inability to rapidly sell a financial asset at close to
      its fair value.


      The residual contractual periods to maturity of financial
      instruments at 31 December 2005 are as follows:

                                                                                                       Residual periods to maturity
                                                       Payable    Up to                    3 months          1 to        3 to   More than
                                                      on demand 3 months                   to 1 year        3 years     5 years  5 years        Unspecified    Total

      Assets

      Cash and cash equivalents
      at central banks                                 999 897            988 942                      -           -           -            -         61 1 988 900

      Cash balances at other
      credit institutions                              552 333              41 666              2 864             3            -       6 286       3 293       606 445

      Financial assets at fair
      value through profit or loss                     428 523              30 643           286 210       1 205 264   1 094 524   1 437 277 3 112 292 7 594 733

      Available-for-sale financial assets               48 526            555 879            661 673       2 201 268   1 972 880   2 424 644 3 239 590 11 104 460

      Loans and advances
      to credit institutions                            73 785         6 849 345          1 337 043         684 858     291 137       12 628       6 795 9 255 591

      Loans and advances to customers                  698 860         3 800 516          5 598 432        6 345 204   5 710 235 28 065 149 1 118 854 51 337 250

      Hedging derivatives                                        -                  -                  -           -           -            -    199 186       199 186


                                                    2 801 924         12 266 991          7 886 222 10 436 597         9 068 776 31 945 984 7 680 071 82 086 565


      Liabilities

      Resources of central banks
      and other credit institutions               (1 014 057)         (2 623 330)          (424 849)        (57 500)    (10 958)   (250 990)      (4 179) (4 385 863)

      Financial liabilities
      held for trading                               (310 847)              (7 126)            (7 093)      (10 206)     (7 665)      (9 935)        (76)     (352 948)

      Customer resources                        (16 063 250) (17 429 669) (12 542 428) (1 394 639) (1 511 644) (1 141 488)                       (78 845)(50 161 963)

      Debt securities                                (148 244)        (2 343 392) (1 854 490) (2 784 462) (1 488 586) (3 032 864)                      1(11 652 037)

      Hedging derivatives                                        -      (298 917)                      -       (301)           -            - (115 311)       (414 529)

      Other subordinated liabilities                    (3 184)                     -      (273 368)       (249 760)   (520 108)   (546 197) (109 681) (1 702 298)

      Consigned resources                                        -                  -                  -   (190 890)   (180 482) (2 153 927)            - (2 525 299)


                                                (17 530 582) (22 702 434) (15 102 228) (4 687 758) (3 719 443) (7 135 401) (308 091)(71 194 937)


      Difference                                (14 737 658) (10 435 443) (7 216 006)                      5 748 839   5 349 333 24 810 583 7 371 980 10 891 628




      Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments
268
Interest Rate Risk                                                            - The “unspecified” column includes:
Interest rate risk corresponds to the risk of the fair value or                  - The book value of trading derivatives, classified in
cash flows associated with a determined financial                                   “assets held for trading”;
instrument changing as a result of a change in market                            - Overdue credit;
interest rates.                                                                  - Book value of value adjustments to hedged assets and
                                                                                    liabilities;
The following table summarises the exposure to interest                       - Equity instruments have been classified as "not subject to
rate risk at 31 December 2005:                                                   interest rate risk";

                                                                                                      Exposure
                                                                                                               Not subject
                                                              Fixed         Variable                           to interest
                                                               rate            rate           Subtotal           rate risk            Unspecified            Total


Assets
Cash and cash equivalents at central banks                1 216 993           783 132         2 000 125                 199            (11 424)         1 988 900
Cash balances at other credit institutions                  487 263           113 218            600 481             1 959                 4 005           606 445
Financial assets at fair value through profit or loss     3 705 119         2 919 432         6 624 551           641 806              328 376          7 594 733
Available-for-sale financial assets                       5 225 180         2 721 653         7 946 833 3 031 822                      125 805        11 104 460
Loans and advances to credit institutions                 9 115 770         1 123 642 10 239 412                            -        (983 821)          9 255 591
Loans and advances to customers                           3 972 789       46 456 943 50 429 732                     12 381             895 137        51 337 250
                                                         23 723 114       54 118 020 77 841 134 3 688 167                              358 078        81 887 379

Liabilities
Resources of central banks
and other credit institutions                            (3 646 187)      (1 925 407) (5 571 594)                   (1 949)         1 187 680         (4 385 863)
Financial liabilities at fair
value through profit or loss                                          -                  -                 -        (1 536)          (351 412)           (352 948)
Customer resources                                      (31 980 053) (18 247 337) (50 227 390)                          (21)             65 448 (50 161 963)
Debt securities                                          (5 604 252)      (6 575 493) (12 179 745)                          -          527 708 (11 652 037)
Other subordinated liabilities                             (451 758)      (1 253 649) (1 705 407)                           -              3 109      (1 702 298)
Consigned resources                                                   -   (2 539 982) (2 539 982)                           -            14 683       (2 525 299)

                                                        (41 682 250) (30 541 868) (72 224 118)                     (3 506)          1 447 216 (70 780 408)

Derivatives
Interest Rate Swaps (IRSs)                               (1 959 014)        1 903 309            (55 705)                   -          365 816             310 111
Interest Rate Futures                                    (1 081 895)                     - (1 081 895)                      -        (539 610)        (1 621 505)
Forward Rate Agreements (FRAs)                                        -           5 800              5 800                  -                     -           5 800
Interest Rate Options                                                 -                  -                 -                -        (258 550)           (258 550)

                                                         (3 040 909)        1 909 109 (1 131 800)                           -        (432 344)        (1 564 144)

Net Exposure                                            (21 000 045)      25 485 261          4 485 216 3 684 661                   1 372 950           9 542 827



The following assumptions were used to prepare the above                      - Cheques pending collection and cheques payable are
table:                                                                           included in the "fixed rate" column;
- Minimum cash reserves were classified in the "fixed-rate"                   - The difference between the nominal and market value of
  column;                                                                        debt securities measured at fair value is included in the
                                                                                 "unspecified" column.




                                                                          Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments   269
      Financial instruments exposed to interest rate risk at 31
      December 2005, by maturity or repricing date, are as
      follows:

                                                                                                           Repricing dates / Maturity dates
                                                          Payable           Up to           1 to              3 months to       1 to          3 to        More than
                                                         on demand         1 month        3 months                1 year      3 years       5 years        5 years      Total

      Assets
      Cash and cash equivalents
      at central banks                                     967 069          978 440            54 616                  -             -                -            -    2 000 125
      Cash balances at other
      credit institutions                                  555 546             6 286           38 646                  3             -                -            -      600 481
      Financial assets at fair
      value through profit or loss                                  -     1 449 646        1 733 504            764 773       506 524       280 954        1 889 150    6 624 551
      Available-for-sale financial assets                    37 751         619 170        1 994 765            903 997     1 297 513     1 251 667        1 841 970    7 946 833
      Loans and advances to credit institutions            208 758        6 915 654        1 698 787          1 395 966         2 000         5 086          13 161    10 239 412
      Loans and advances to customers                      702 396      14 634 421       13 887 816          19 167 127       550 669       500 585         986 718    50 429 732


                                                         2 471 520      24 603 617       19 408 134          22 231 866     2 356 706     2 038 292        4 730 999   77 841 134


      Liabilities
      Resources of central banks
      and other credit institutions                    (1 422 301)      (2 310 559)      (1 108 177)           (658 443)      (64 282)       (7 832)               -   (5 571 594)
      Customer resources                              (18 868 474)      (7 806 608)      (7 860 409)        (12 144 619)   (1 250 199)   (1 390 982)       (906 099) (50 227 390)
      Debt securities                                     (109 944)     (3 163 662)      (4 914 066)         (2 760 713)   (1 003 866)     (134 799)        (92 695) (12 179 745)
      Other subordinated liabilities                       (10 183)        (364 521)        (365 191)          (523 128)             -     (400 000)        (42 384)   (1 705 407)
      Consigned resources                                           -           (676)    (2 516 009)            (23 297)             -                -            -   (2 539 982)


                                                     (20 410 902) (13 646 026) (16 763 852) (16 110 200)                   (2 318 347)   (1 933 613) (1 041 178) (72 224 118)


      Derivatives
      Interest Rate Swaps (IRSs)                                    -     1 907 000      (3 205 014)         (1 247 791)    1 392 479       933 697         163 924       (55 705)
      Interest Rate futures                                         -                -                 -               -     (505 200)       (1 695)       (575 000)   (1 081 895)
      Forward Rate Agreements (FRAs)                                -                -                 -               -        5 800                 -            -        5 800


                                                                    -     1 907 000 (3 205 014)              (1 247 791)      893 079       932 002        (411 076) (1 131 800)


      Net Exposure                                   (17 939 382)       12 864 591         (560 732)          4 873 875       931 438     1 036 681        3 278 745    4 485 216


      In producing the above table, minimum cash reserves were
      classified in the “up to 1 month” column.


      Customers’ demand deposits, on which no interest is paid, are
      considered to be fixed-rate and included in the “payable on
      demand“ column.




      Notes to the Consolidated Financial Statements | Disclosures Relating to Financial Instruments
270
Fair Value
The following table includes a comparison between the fair
value and book value of the principal assets and liabilities
recognised at amortised cost at 31 December 2005:


                                                                                                                            Balances not
                                                                                   Balances analysed                           analysed               Total
                                                                         Book                Fair                                 Book                book
                                                                         value              value          Difference            value               value

Assets
Cash and cash equivalents at central banks                             1 998 805         1 998 823                   18            (9 905)        1 988 900
Cash balances at other credit institutions                              605 732             605 732                    -               713           606 445
Loans and advances to credit institutions                          10 235 077          10 251 533              16 456          (980 374)          9 254 703
Loans and advances to customers                                    50 156 411          50 234 466              78 055          (220 480)         49 935 931

                                                                   62 996 025          63 090 554              94 529       (1 210 046)          61 785 979

Liabilities
Resources of central banks and other credit institutions               5 409 766         5 409 407                 359       (1 023 903)          4 385 863
Customer resources                                                 47 816 369          47 830 499            (14 130)         2 345 594          50 161 963
Debt securities                                                    12 140 213          12 166 179            (25 966)          (488 176)         11 652 037
Other subordinated liabilities                                         1 706 216         1 752 128           (45 912)              (3 918)        1 702 298
Consigned resources                                                    2 545 189         2 550 430             (5 241)           (19 890)         2 525 299

                                                                   69 617 753          69 708 643            (90 890)         1 171 927          70 789 680




Fair     value    was    determined      using   the       following       42. Disclosures on Insurance
assumptions:                                                               Risks
- The book value of amounts payable/receivable on
 demand corresponds to their fair value;                                   The following summarises the underwriting and risk
- Caixa determined the fair value of the remaining                         management policy for the CGD Group’s insurance
 instruments using discounted cash flow models, taking                     business in Portugal, namely of the Caixa Seguros
 into consideration the contractual terms of the operations                companies (Company).
 and use of interest rates appropriate to the type of
 instrument, including:                                                    42.1. Risk Acceptance
  - Market interest rates for loans and advances to and                    Risk acceptance and management is structured on three
       resources of other credit institutions;                             major levels, based on a model for delegating competencies.
  - Interest rates charged on Caixa’s new loan operations
       at the balance sheet date, for comparable credit types;             Each level has specific methodologies and procedures, in
  - Yield curves incorporating Caixa’s risk spread, for                    accordance with its competencies, allowing interconnection
       liabilities issued for institutional investors, based on the        and harmonisation between them.
       type of instrument and respective maturity;
  - Reference interest rates on retail product issues.
- The “Balances not analysed” column includes essentially:
  - Overdue credit, net of impairment;
  - Balances of entities not included in Caixa’s calculations.




                                                                                   Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks   271
      The third level, specific to the commercial networks,                             risks, namely risk analysis performed by specialised
      includes the delegation of standard risk acceptance                               companies.
      competencies, in accordance with a framework of written
      standards and procedures , based particularly on the                              These instruments are aimed especially at assessing in loco,
      following criteria:                                                               the deviations from the average standards of a specific risk,
      - Standard clauses;                                                               thus allowing the maximum expected losses and the weak
      - Risks and activities with low or very low claim ratio track                     and strong points of the proposing entity or object of the risk
        records;                                                                        to be assessed. It also allows the specific assessment of certain
      - A homogenous, easy to identify risk area;                                       coverages or limits on capital acceptance thus establishing an
      - Small amounts of insured capital, allowing high risk                            adequate, balanced contract between the parties.
        dilution, usually not exceeding the Companies’ retention
        limits;                                                                         The first risk acceptance level is the responsibility of the
      - Risks in respect of which accumulation both in terms of                         insurance product’s Technical Areas which are responsible
        coverage and/or geographical dispersion is known and                            for the acceptance of risks which have not been delegated
        controllable.                                                                   to the two above mentioned levels and for the technical
                                                                                        management of the insurance product. The acceptance
      Available instruments include: standardised rates, risk                           conditions for very high unit value risks, or which involve
      acceptance and delegation of authority regulations,                               very broad sets of risks, are analysed by a Risks Committee
      product manuals, standard insurance policies and insurance                        which is made up of a minimum of three members of the
      proposals, standard declarations, technical questionnaires                        Board of Directors and participation of Technical,
      and rules on circuits and procedures.                                             Commercial and Reinsurance chief officers.


      The second level includes several multidisciplinary technical                     The first risk acceptance level is provided with a
      units that support the commercial networks, to which                              multidisciplinary technical team which is highly specialised
      competencies to accept and analyse specific risks have                            in terms of insurance activities and/or products, assisted by
      been delegated, particularly based on the following criteria:                     risk analysis and actuarial specialists.
      - Standard product subscriptions;
      - Limits on the acceptance of the following risks and                             Risk acceptance is based on stringent technical standards,
        activities: i) risks or activities with a high general claims                   designed to identify risks with high loss potential
        rate; ii) risks or activities that, when considered                             (seriousness and frequency) in order to achieve sustained
        individually present a very high potential for loss; iii) risks                 portfolio growth and a balanced technical result, with the
        or activities whose acceptance should be based on a                             use of facultative reinsurance when the risks cannot be
        specific, specialised technical analysis; iv) risks related with                included in the Treaties.
        economic activities in contraction;
      - Acceptance of low to medium insured capital amounts                             Human life insurance risk acceptance criteria are defined in
        allowing average risk dilution, within the limits of                            medical tables, in which insured capital limits and
        reinsurance treaties but not exceeding the average value                        respective clinical tests have been defined individually or
        of automatic acceptance capacities (retention + treaties);                      jointly between the Life insurance business area and the
      - Risk accumulation studies, considering the customer in                          company’s reinsurers.
        global terms.
                                                                                        Whenever risks are not covered by reinsurance tariff
      Notwithstanding the fact that these risks are within a                            handbooks on the company’s automatic acceptance
      properly delimited framework, the risk acceptance units,                          conditions, they are sent to the reinsurers’ underwriting
      when necessary, have additional instruments for assessing                         offices.




      Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks
272
42.2.Technical Management                                         analyses are made, not only by product groups, but mainly
Technical management of the various insurance products            by products under management.
involves the definition of the insurance policies’ prices and
clauses, definition and control of the subscription policy        Portfolio Selection and Restructuring
and the control and monitoring of premiums, claims and            The purpose of this function is to improve the profitability
technical results. This allows the monitoring of risks and of     of the portfolio under management, both by restructuring
their accumulation in the portfolio.                              risks with negative results (frequency and/or high claims
                                                                  rate), or by introducing changes to contractual terms
This management function is performed in connection with          (coverage, limits, premiums) as well as providing customer
the reinsurance area, for the production of relevant              advisory services (recommendations for the implementation
information to facilitate the annual negotiation of               of prevention and security measures to improve risk
reinsurance treaties or, in specific situations, the use of       quality).
facultative reinsurance, with the claims management area,
when required, supporting the settlement of complex               Insurance Risk Concentrations
claims.                                                           Regular studies on portfolio risk profile, by class of insured
                                                                  capital/assumed liability, activity, insured object and
42.3. Risk Control Management                                     coverage, provide management information that enables
Instruments                                                       the impact of possible changes in coverage, reinsurance
Organisation’s Internal Risks                                     treaties and retention policies to be estimated.
In order to control and minimise the organisation’s internal
risk, the standards and procedures have been published,           These studies also focus on specific coverage, geographical
and are accessible and generally known, their application         area, type of liability assumed or insured object, allowing
being adequately monitored by the competent areas.                the maximum risk limit per class to be determined and
                                                                  quantified, in addition to assessment of the impact on the
Portfolio Profile Studies                                         portfolio, of catastrophic claim scenarios.
Regular portfolio risk profile studies are performed, by class
of capital/liability assumed, by activity and event and type
of coverage.


This type of study allows a qualitative analysis of claim rates
on specific risk classes (insured capital amounts, insured
objects, activities, coverage) to be made, so as to assess the
existing delegation of authority and correction of any
distortions, correlating the main pricing factors and
changing current products or creating new ones.


Periodic Analysis of Portfolio Evolution
Evolution of the portfolio under management is monitored
periodically, through specific analysis of insurance policy
behaviour, both in terms of number of policies and new
and cancelled premiums.


These studies also include analyses of claim behaviour,
monitoring their respective frequency and rate. These




                                                                        Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks   273
      42.4 Reinsurance Policies                                                               As mentioned, risk retention is adapted to existing
      Determining factors for limiting or transferring insured risk                           portfolios and is based on negotiated capacity and balance
      lie in the nature of the business and insured risk amounts.                             between premium ceding operations and that capacity.
      These can be differentiated between “mass insurance”
      (motor, labour and personal accident) and property                                      As regards fire and other risks, engineering and marine
      insurance business (the different component parts of fire                               insurance, the companies operate with proportional
      and other risks, engineering and machinery and marine                                   treaties.
      risks, general third party liability and miscellaneous risks).
                                                                                              Mass insurance risks (motor, personal and labour accident)
      Compliance with subscription rules is associated with the                               are covered by an excess of loss treaty, which is more
      available reinsurance cover in force, this being a                                      adequate to these types of risk and portfolios and to the
      determining factor for the acceptance or rejection of certain                           company’s financial capacity. The statistical evolution of
      types of risk.                                                                          claims and bids received for the different levels that this may
                                                                                              have are taken into account in defining this priority.
      Risks involving high amounts of insured capital or serious
      situations are analysed previously and their acceptance is                              The general third party liability product is also protected by
      strictly dependent on and supported by the reinsurance                                  an excess of loss reinsurance treaty.
      area.
                                                                                              The “Maximum cumulative risk” on retentions is protected
      The company has based its reinsurance policy on the                                     by adequate excess of loss treaties for each situation.
      existence of proportional, non-proportional and facultative
      reinsurance treaties, and other types of reinsurance that                               The accumulations resulting from “Coverage of Earthquake
      may be necessary to obtain adequate reinsurance protection                              and Natural Risk Phenomena”, classified as “catastrophic”
      for accepted risks.                                                                     in terms of retentions, are reinsured using Excess of Loss
                                                                                              treaties, their retention being determined by the company’s
      Reinsurance cover for the principal property insurance                                  financial capacity.
      products, as well as respective retention, is based on the
      ratio between portfolio structure in terms of insured capital                           The selection criteria for reinsurers is based on their
      and respective premium volume for each product and on                                   reliability and financial solvency, ability to provide services
      the       statistical        monitoring            of      profitability          and   and monitoring of their performance in terms of
      retention/premiums ratio at the end of the year or cycle and                            payments/collections, ratings attributed by international
      the company’s financial capacity to absorb frequent claims.                             rating agencies also being a determining factor.


      In determining retention per event, the fact that
      catastrophes do not occur frequently is taken into account.
      Retention reflects what is technically expected in terms of
      the impact of the same catastrophe on the company’s
      capital and its absorption over a defined period, using a
      conservative scenario of a return period of 500 years, which
      is unusual with respect to markets subject to catastrophic
      risks.




      Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks
274
42.5. Asset and Liability Management                                 reality. Cash flow projections are not performed for equity
(ALM) Techniques Used by the                                         securities, their current market value being used instead.
Company.
The company functions differently depending on the type              Policy for allocating investments to products
of product in question.                                              In the case of products with profit sharing and unit-linked
                                                                     products in which the investment risk is borne by the
Asset and Liability Adequacy Procedures                              policyholder, the respective investment portfolios are
Immunised Products                                                   placed in autonomous funds. An autonomous fund is
These are typically products with a fixed rate, defined at           managed for each product, with the purpose of ensuring
inception, that do not entitle the policyholders any type of         independence of the respective portfolios and avoiding
profit-sharing. These products are covered by investments            contamination resulting from placing the investments
with similar maturity and payment dates so as to obtain a            covering different products in a single portfolio.
return on the investments that covers the company’s margin
and contracted interest payable to the clients.                      Products without profit-sharing are recorded in globally
                                                                     managed portfolios as the performance of these portfolios
Temporary mismatches may occur between assets and                    does not affect income payable to the clients. However,
liabilities, usually due to early redemptions. For this reason the   despite the existence of greater management flexibility, a
investment policy is restricted to highly liquid investments in      prudent approach of matching assets and liabilities has
“investment grade” rated securities admitted to listing on           been adopted.
OECD markets.
                                                                     Assets are allocated to portfolios based on their market
Profit Sharing Products with Guaranteed                              value, especially in the case of portfolios in which the
Principal and Income                                                 policyholders are entitled to a share of its results. An
The composition of the investment portfolio of these                 autonomous fund associated with each portfolio is also set
products depends of the applicable management strategy               up in these cases.
and definition of the individual product benchmarks.
                                                                     For each type of asset, maximum exposure limits are also
The benchmarks are based on market interest rates, liability         defined.
maturity and guaranteed return for clients. To minimise risk
as the maturity of liabilities approaches, the relative weight       In addition to the restrictions imposed under current
of the investment in variable yield securities is gradually          legislation, the Companies’ portfolio management also
reduced and replaced by investment in fixed return                   takes the following points into consideration:
securities.
                                                                     I. The maximum exposure on securities which have not
A diversity of relevant information is considered for                   been admitted to trading on the stock exchange on
projecting future cash flows, namely that relating to                   other regulated markets of European Union member
current contracts, contract maturity dates, current liabilities         states, or in markets in OECD countries legally defined
capitalised by profit participation and guaranteed income               as equivalent, amounts to 15% of the total portfolio
rate.                                                                   value and must always be expressly approved by the
                                                                        Board of Directors;
Cash flows on investments in fixed income or fixed rate
securities are projected using the assets rate or scenarios,         II. Foreign currency investments must be consistent with
in accordance the yield curve, depending on which is                    the respective liabilities in at least 95%;
expected to be more in line with the expected future




                                                                           Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks   275
      III. Derivatives, Repos and Security Lending Operations -                             Investment in other unspecified classes of assets must
          Derivatives may be used for hedging, trading or                                   be specifically approved by the Board of Directors.
          decreasing investment costs, in accordance with the
          legislation in force.                                                             Current    regulations      also   impose   limitations   on
                                                                                            investments.
          Repos and security lending operations are permitted
          under the conditions defined by current legislation,                           42.6. Life Insurance
          provided that they do not compromise the allocation                            There are three major types of life insurance contracts that
          limits defined for each of the respective asset classes.                       fall within the scope of IFRS 4, in which the nature of the
          These operations require specific approval although                            risk covered is as follows:
          general approval may be given for market derivatives.
                                                                                         Risk Products
          Derivatives risk assessment models:
          There is a generic model for assessing expected                                The greatest risk on these products is mortality, although a
          return/risk based on the composition of the asset                              large number of contracts also cover disability risk. A
          classes. The expected portfolio returns are subject to a                       significant part of these risks is transferred to reinsurance
          sensitivity analysis based on the volatility of their assets.                  companies.
          This type of assessment is used for asset allocation
          decisions, in an endeavour to set up risk controlled                           Profit-sharing is typically based on the following type of
          portfolios to optimise return within the current market                        technical/financial account:
          environment.
                                                                                            (Premiums + Income - Claims – Management charges -
          Risk assessment is performed internally by the                                    Change in mathematical provision - Any existing
          Investment           Department              with      the      involvement,      negative balance from the preceding year) x Profit-
          whenever necessary, of the Group’s Risk Management                                sharing coefficient
          Department. Various risks are monitored, namely:
          - market risk;                                                                 The discretionary nature of such profit sharing is associated
          - interest rate risk;                                                          with the use of the Fund for Future Payments to determine
          - credit risk by issuer and financial group;                                   the income and the profit-sharing coefficient, as only
          - liquidity risk.                                                              minimums are defined in profit-sharing schemes.


      IV. Investment on fixed income assets
          Bonds eligible for acquisition must comply with the
          following matrix which incorporates both residual term
          to maturity and assumed risks. No investment should be
          made in assets with a rating lower than BBB or
          equivalent.


                                        Sovereign Debt              Corporate Debt

          Up to 1 year                           BBB                        BBB

          1 - 5 years                             A-                         A-

          5 -15 years                            A+                         AA-

          More than 15 years                     A+                         AAA




      Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks
276
Annuity Products
                                                                  and a variable component that depends on the profitability
The greatest risk on these products is longevity.                 of a specific portfolio of assets partly dependent on the
                                                                  company’s discretion.
Profit-sharing is typically based on the following type of
technical/financial account:                                      Profit-sharing is typically based on the following type of
                                                                  technical/financial account:
   (Premiums + Income - Claims – Management charges -
   Change in mathematical provision - Any existing                   (Percentage           of     income         -     Technical        income         –
   negative balance from the preceding year) x Percentage            Management charges - Any existing negative balance
   of profit-sharing                                                 from the preceding year) x Percentage of profit-sharing


The discretionary nature of such profit sharing is associated     The discretionary nature of such profit sharing is associated
with the use of the Fund for Future Payments to determine         with the use of the Fund for Future Payments to determine
the income and profit-sharing coefficient, as only                income, profit-sharing coefficient, percentage of income
minimums are defined in profit-sharing schemes.                   and management charges, as only minimums are defined
                                                                  in profit-sharing schemes.
Capitalisation Products
Interest risk rate is the principal risk factor in these          The following table presents a forecast of cash inflows and
products.                                                         outflows for each of these product types (PS – profit-
                                                                  sharing), over the next three years.
Profit-sharing contracts only are covered by IFRS 4 and so
income allocated to policyholders has a fixed component


Fidelidade Mundial

Year                                     Risk                            Annuities                                   Capitalisation with PS
                                Inflow          Outflow         Inflow              Outflow                     Inflow                   Outflow
2006                           109 442           73 001              -                  4 473                   28 843                    311 159
2007                            77 707           52 457              -                  4 398                   25 917                    399 365
2008                            73 183           50 759              -                  4 235                   22 962                    522 887



Império Bonança

Year                                                                     Annuities                                   Capitalisation with PS
                                                                Inflow               Outflow                    Inflow                   Outflow
2006                                                                 -                11 116                   45 109                    204 650
2007                                                                 -                10 742                   40 549                    163 490
2008                                                                 -                10 345                   36 233                    105 227




                                                                          Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks   277
      The following table shows the change in these cash inflows
      and outflows resulting from a 5% increase in expected
      early redemptions.


      Fidelidade Mundial
      Year                                                       Risk                            Annuities                  Capitalisation with PS
                                                   Inflow                 Outflow        Inflow                 Outflow    Inflow             Outflow
      2006                                       105 171                     70 748              -                4 473    28 106             452 342
      2007                                        71 858                     48 637              -                4 398    23 953             500 744
      2008                                        64 170                     44 771              -                4 235    20 129             570 632



      Império Bonança

      Year                                                                                           Annuities                Capitalisation with PS
                                                                                        Inflow                   Outflow     Inflow            Outflow
      2006                                                                                   -                    11 116    44 013             236 766
      2007                                                                                   -                    10 742    37 436             180 253
      2008                                                                                   -                    10 345    31 652             116 245



      The following table shows the estimated change in
      liabilities recorded in the balance sheet at 31 December
      2005, as a result of changes in some of the assumptions
      used.


      Fidelidade Mundial

      Assumption                                                                            Change in assumption                    Change in liability
      Mortality rate                                                                                  + 25%(*)                        3 805
      Asset yield rate                                                                                 + 0.5%                       10 806
      Inflation rate                                                                                    + 1%                           180
      Redemption rate                                                                                   + 5%                        (5 108)

      (*) in terms of Annuities, the change of the mortality rate was negative.




      Império Bonança

      Assumption                                                                            Change in assumption                    Change in liability
      Mortality rate                                                                                  + 25%(*)                        9 225
      Asset yield rate                                                                                 + 0.5%                             -
      Inflation rate                                                                                    + 1%                              -
      Redemption rate                                                                                   + 5%                              -

      (*) in terms of Annuities, the change of the mortality rate was negative.




      Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks
278
42.7. Interest Rate Risk                                          swaps in portfolios to reduce interest rate risk or in cases
Interest rate risk management policy is based on a twofold        in which this instrument has been considered more
approach. In the case of immunised portfolios and fixed-          efficient than the direct use of assets.
rate capitalisation insurance, coverage is adjusted to the
liabilities assumed. In this case, the cash flow profile of the   At 31 December 2005 Caixa Seguros had a portfolio of
investment in assets and the outflow of liabilities on            interest rate swap contracts to hedge financial risks on
maturity, are matched. There is practically no active             fixed-rate life insurance products.
management of interest rate risk during the product’s life.
                                                                  Risk management/counterparty analysis policy is based
Interest rate risk on benchmark management model                  essentially on the selection table at the time the asset is
portfolios is managed actively in accordance with target          purchased, disclosed in the “Asset separation requirements”
exposure levels, defined by benchmarks, using tactical            item, designed to protect the policyholders through restrictions
underweight/overweight management based on the                    in the use of the company’s assets. The risk is, however,
expectation of changes on the curve structure, in order to        monitored continuously by analysing international rating
optimise the return on assets.                                    agencies’ opinions/outlooks in order to prevent a downgrade
                                                                  of the rating of the securities held. On the other hand, the
The following table shows that the exposure level to longer       definition of internal limits by counterparty, not authorising the
periods in quantitative terms is not significant.                 accumulation of risk, ensures good risk level dilution over time.

Maturity Risk                                                                  Amount                          Weight                    Mod Dur
Fixed income                                                                 7 323 736                        100.00%
   Fixed-rate bonds                                                          4 365 982                         59.61%                         5.1
       Maturity 1 - 3 years                                                  2 030 581                         27.73%                         2.4
       Maturity 4 - 5 years                                                     804 887                        10.99%                         4.4
       Maturity 6 - 7 years                                                     561 460                          7.67%                        6.0
       Maturity 8 - 10 years                                                    466 238                          6.37%                        7.5
       Maturity 11 - 19 years                                                   188 519                          2.57%                      10.0
       Maturity 20 - 29 years                                                   300 058                          4.10%                      15.1
       Maturity of more than 30 years                                            14 238                          0.19%                      18.1
   Variable-rate bonds                                                       2 244 615                         30.65%                         0.2
   Bonds with maturity < 1 year                                                 713 139                          9.74%                        0.3


For the purpose of risk monitoring, companies also use the
services of CGD’s risk control unit, which publishes its
internal indicators.


This risk is also being monitored by supervisory bodies, a
specific stress-test having been made on the asset
portfolio as at 31 December 2004 to quantify the impact
of adverse shocks. Stress-testing as at 31 December
2005 is still in progress and so it is not possible to
present updated sensitivity analyses of the investment
margin.


The use of derivatives for risk management purposes is
currently limited to the occasional use of interest rate




                                                                        Notes to the Consolidated Financial Statements | Disclosures on Insurance Risks   279
      43. Impact of the Adoption of
      IFRS

      The following table summarises the impact of the adoption
      of International Financial Reporting Standards:

                                                                                                                                    Net
                                                                                                            Equity                income
                                                                                           Note    31/12/2004      31/12/2003      2004


      Balance in accordance with the PCSB standards                                                2 997 583        3 602 819     448 481


      Impact of standards adopted at 1 January 2004
      Property and other tangible assets                                                    (a)      (10 550)          (6 436)     (4 114)
      Intangible assets                                                                     (b)      (19 313)         (17 297)     (2 016)
      Commissions for services rendered                                                     (c)      (11 690)         (10 371)     (1 319)
      Employee benefits                                                                     (d)     (509 177)      (1 180 681)   (150 796)
      Deferred taxes                                                                        (e)      322 049          284 699     (19 790)
      Unibanco and Unibanco Holdings                                                        (f)      256 751          206 605     (50 747)
      Provisions                                                                                       7 349            5 674       1 675
      Currency exchange changes                                                                       (7 440)          (4 795)      2 595
      Other                                                                                           (5 050)          (5 757)     (1 060)
                                                                                                      22 929        (728 359)    (225 572)
      IFRS balances - pro-forma accounts                                                           3 020 512        2 874 460     222 909


      Impact of the adoption of IAS 39 and IFRS 4 at 1 January 2005
      Deferred commissions relating to credit operations                                    (g)      (83 941)
      Loan impairment                                                                       (h)      (42 292)
      Measurement of the securities portfolio                                                (i)     137 795
      Fair value measurement of derivatives, hedge
         accounting and structured liabilities                                               (j)      (1 172)
      Valuation of insurance contracts                                                      (k)      (15 890)
      Deferred taxes                                                                         (l)      (4 455)
      Adjustment sub-total at 1 January 2005                                                          (9 955)
      IFRS balances at 1 January 2005                                                              3 010 557


      (a) The table below provides information on the transition
          adjustment relating to property and other tangible assets:

                                                                                                         2004                       2003


      Tangible assets
          Impairment of property for own use                                                            (15 966)                  (16 496)
          Impairment of other tangible assets                                                              (786)                     (807)
                                                                                                        (16 752)                  (17 303)
      Other adjustments relating to tangible assets                                                      (5 669)                   (2 876)
      Other adjustments relating to property for own use                                                 12 063                    12 063
                                                                                                        (10 358)                   (8 116)
      Revaluation of investment properties                                                                 3 120                    3 294
      Impairment of assets received as settlement of defaulting loans and other property                 (3 312)                   (1 614)
                                                                                                        (10 550)                   (6 436)




      Notes to the Consolidated Financial Statements | Impact of the Adoption of IFRS
280
   Caixa obtained appraisals for a significant portion of its      The Group made a detailed review of all the amounts
   portfolio of property for own use. Whenever unrealised          capitalised in this heading at the transition date,
   losses were determined in relation to their book value          focused especially on amounts recorded in fixed assets
   net of depreciation impairment was recorded if the              in progress, assessing their compliance with the IAS 38
   profitability of the respective operating units is not          rules.
   sufficient to absorb the loss.
                                                                   As a result of this review, amounts not eligible for
   On the introduction of IFRS, the Group made a detailed          recognition under IFRS including, among others,
   analysis of its property in order to classify it in the         projects not eligible, re-planning costs and training
   categories defined in the standards regulating such             costs, were charged to retained earnings.
   assets. Although most property continued to be
   classified as property for own use, there were several          In accordance with IAS 38, amortisation of intangible
   cases of rented property, normally corresponding to             assets is based on their estimated useful life (periodically
   parts or sub-divisions of buildings, that are mainly for        revised), reflecting the use by the entity of the economic
   own use. Such property was classified as investment             benefits generated by the asset. The Group revised its
   property, and started being recorded at fair value,             estimates of useful life of the intangible assets, notably
   determined based on appraisals. As a result, gains were         software applications which, in several cases were
   recognised at 1 January 2004.                                   retrospectively changed. This revision generated a net
                                                                   positive impact on retained earnings.
   The transition adjustment relating to repossessed assets
   and other property not used in the Group’s operations,       (c) In accordance with current practice for the banking
   recorded in “Other assets”, results essentially from the        sector in Portugal, certain commissions charged to
   fact that an estimate of the costs to be incurred on the        customers were recognised as income at the time of
   sale of such property is now considered when                    collection. In accordance with IAS 18, such commissions
   determining impairment.                                         are deferred over the period on which the related
                                                                   services are rendered.
(b) IAS 38 imposes very restrictive requirements in relation
   to the previous standards for the recognition of             (d) Employee benefits are under the scope of IAS 19. The
   intangible assets.                                              impact of transition at 1 January 2004 is made up as
                                                                   follows:



Caixa Geral de Depósitos

Change in actuarial assumptions
    Decrease in discount rate from 6% to 5.5%                                                                                       (191 346)
    Inclusion of death grant                                                                                                          (37 793)
                                                                                                                                    (229 139)
Reversal of deferred actuarial gains and losses                                                                                     (562 204)
Healthcare                                                                                                                          (285 285)
Labour suspension agreements                                                                                                          (16 526)
Long service bonus                                                                                                                    (46 591)
Employee profit sharing                                                                                                               (26 491)
Death grant prior to retirement age                                                                                                     (2 122)
France branch liabilities                                                                                                               (1 500)
                                                                                                                                    (940 719)
Other entities                                                                                                                        (10 823)
                                                                                                                                 (1 180 681)




                                                                    Notes to the Consolidated Financial Statements | Impact of the Adoption of IFRS   281
          Actuarial Assumptions                                                                 Shareholders’ General Meetings, was recorded as a
          The actuarial assumptions used by Caixa in accordance                                 distribution of net income for the prior year, by charge
          with the PCSB standards were based on the minimum                                     to equity. Upon transition to IFRS, participation in profits
          requirements established by the Bank of Portugal. In                                  started being provided for by charge to the income
          order to comply with the specific requirements of IAS 19,                             statement for the year to which it relates. The amount
          Caixa made an assessment of the adequacy of its                                       provided at 1 January 2004 totalled €26 491 thousand.
          actuarial assumptions with reference to 1 January 2004.                               Caixa had already implemented this procedure in the
          Changes made to the assumptions resulted in an                                        preparation of its Statutory accounts for 2004 under
          increase of €229 139 thousand in liabilities (Note 36.).                              PCSB.


          Actuarial Gains and Losses                                                         (e) In accordance with the previous standards and current
          CGD adopted the possibility allowed in IFRS 1 of not                                  practice in the banking sector in Portugal, Caixa did not
          recalculating deferred actuarial gains and losses since                               record deferred taxes. The amount presented above
          the inception of the plans. In adopting this option                                   corresponds to deferred taxes relating to situations that
          usually referred to as “reset”, all deferred actuarial                                already existed at those dates and to transition
          gains and losses at the transition date were written-off,                             adjustments to IFRS (see details in Note 17.).
          by charge to retained earnings. Deferred actuarial losses
          on pension liabilities at 1 January 2004, calculated in                            (f) In the PCSB accounts, the Group recorded its 4.84%
          accordance with Bank of Portugal rules, totalled                                      and 12.62% equity investments in Unibanco - União de
          €562 204 thousand (Note 36.).                                                         Bancos Brasileiros and Unibanco Holdings, respectively,
                                                                                                using    the    equity    method      following    specific
          Post Employment Healthcare                                                            authorisation by the Bank of Portugal. On transition to
          In accordance with Bank of Portugal regulations and                                   IFRS, at 1 January 2004 these investments were
          current practice in the banking sector in Portugal, these                             classified as “Available-for-sale financial assets” and
          costs were recognised on a cash basis. In accordance                                  measured at fair value. The impact on pro-forma net
          with IAS 19, this benefit corresponds to a defined                                    income for 2004, corresponds essentially to the
          benefit plan, and consequently the corresponding                                      negative difference between dividends received from
          liability is calculated and recorded in a manner similar to                           these entities and income resulting from application of
          pension liabilities.                                                                  the equity method of accounting.


          The liability at 1 January 2004 totalled €285 285 thousand                         (g) As explained in Note 2.17., in compliance with IFRS the
          (Note 36.).                                                                           Group started recognising commissions charged for
                                                                                                setting up loan operations in their initial recognition
          Other Benefits                                                                        amount, being recognised in the income statement over
          In compliance with the PCSB standards, Caixa recognised                               the period of the operations. Consequently, a review
          the cost for payments of long service bonuses to its                                  was made of the commissions charged on loan
          employees (Note 36.) on a cash basis. Upon transition to                              operations outstanding at 1 January 2005, and the
          IAS 19, Caixa calculated the liability with this benefit                              corresponding adjustment to the amortised cost of the
          corresponding to the past service of its employees. The                               respective loans was calculated and recorded.
          amount of the liability at 1 January 2004, which was
          recognised by Caixa, totalled €46 591 thousand.                                    (h) Provisions for loans granted were recorded in
                                                                                                accordance with the specific rules defined by the Bank
          In accordance with the previous standards, Caixa                                      of Portugal as explained in Note 2.6. e). Upon adoption
          employees’           participation         in    profits,       decided       at      of IFRS the Group started recording impairment,




      Notes to the Consolidated Financial Statements | Impact of the Adoption of IFRS
282
   calculated in accordance with the rules explained in
   Note 2.6. d), under which impairment losses include the
   time effect of discounting estimated cash flows
   receivable on each operation to the balance sheet date.


   The impairment of loans granted determined by the
   Group        as    at   1   January    2005     exceeded        by
   €42 292 thousand the provisions recorded under the
   previous standards, due essentially to the effect of
   discount referred to in the preceding paragraph.


(i) This impact results essentially from the measurement at
   fair value of securities previously recognised in the
   investment and equity investment portfolios in
   accordance with the policies explained in Note 2.6. e),
   as    well    as    from    Group     insurance     companies’
   investments in debt instruments (see Note 2.16.), and is
   made up as follows:


Measurement of financial instruments classified as “available-for-sale financial assets”                                                          117 788

Measurement of financial instruments classified as “financial assets at fair value through profit or loss”                                          19 513

Reversal of deferred gains on the sale of securities - insurance                                                                                        494

                                                                                                                                                  137 795



   With the adoption of IAS 39 on 1 January 2005, the Group                   increase of €138 860 thousand in their book value as at
   transferred its trading portfolio and part of its investment               1 January 2005.
   portfolio to the “Financial assets held for trading” and
   “Other financial assets at fair value through profit and loss”         (j) As explained in Note 2.6. e), currency swaps were not
   headings. The remaining part of the investment portfolio                   measured at fair value under PCSB standards. Upon
   and the former equity investment portfolio, as well as most                adoption of IAS 39, these derivatives were measured at fair
   of the securities portfolios held by Group insurance                       value, resulting in a positive transition impact of
   companies, were transferred to the “Available-for-sale                     €5 457 thousand.
   financial assets” heading.
                                                                              In addition, the remaining hedging derivatives were
   The impact of the transition results essentially from the                  generally not measured at fair value, in line with the
   recognition of unrealised gains on the former investment                   accounting policies applicable to the hedged items. The net
   portfolio and recognition of impairment losses on                          impact resulting from measuring these derivatives at fair
   investments in addition to those already recognised in                     value and the valuation of the hedged items, comprising
   accordance with Bank of Portugal Notice 4/2002                             essentially structured liabilities, was recognised as a
   (Note 2.6. e)). Fixed-income securities held by Group                      decrease of €6 629 thousand on equity.
   insurance companies were also carried at cost, adjusted for
   straight-line amortisation of the premiums and discounts
   arising on acquisition. The measurement at fair value of
   securities held by the insurance companies resulted in an




                                                                                Notes to the Consolidated Financial Statements | Impact of the Adoption of IFRS   283
      (k) The transition adjustment resulting from the adoption of
          IFRS 4 on insurance contracts issued by the Group as at
          1 January 2005 is made up as follows (without considering
          the respective tax effect):

      Non-life insurance
          Reversal of provisions for exceptionally large claims                                                                         7 842
          Recognition of provisions for the Labour Accident Fund                                                                      (14 495)
                                                                                                                                       (6 653)
      Life insurance
          Recognition of provisions as a result of liability adequacy tests                                                           (28 917)
          Appropriation of the shadow reserve                                                                                          11 261
          Recoverable losses on technical accounts                                                                                      8 419
                                                                                                                                       (9 237)
                                                                                                                                      (15 890)




          The provisions for exceptionally large claims recorded by                 forward from previous years, that are recoverable based on
          the Group on the date of adoption of IFRS 4 were                          those gains. The adoption of this policy at 1 January 2005,
          reversed, as the recording of provisions for equalisation                 generated a net negative impact of €9 237 thousand on
          or catastrophes is not allowed under this standard.                       the Group’s equity.


          Following its adoption of IFRS 4, the Group recorded                      (l) Corresponds to the tax effect of the transition
          provisions for the cost of contributions to the Fund for                     adjustments resulting from the adoption of IAS 39 and
          Labour Accidents, relating to claims occurred in prior                       IFRS 4.
          years, which represent future payments under insurance
          contracts in force as at the date of the financial                        44. Note Added for Translation
          statements. The Fund for Labour Accidents, managed
          by the Portuguese Insurance Institute, assumes the                        The accompanying financial statements are a translation of
          liability for the annual increases in pensions paid to                    financial statements originally issued in Portuguese in
          claimants in this technical branch, and its income                        accordance with generally accepted accounting principles
          consists of contributions made by insurance companies                     in Portugal. In the event of discrepancies the Portuguese
          and the policyholders.                                                    language version prevails.


          As explained in Note 2.16., the Group performs
          adequacy tests of liabilities relating to insurance
          contracts in force at the balance sheet date. As regards
          the life insurance business these tests are performed for
          each product, the estimated liabilities being compared
          with the amount of the respective mathematical
          provisions, plus a “shadow reserve”. The shadow
          reserve corresponds to the amount of net unrealised
          capital gains not yet distributed to the insured, less the
          part of the gains attributable to the Group, determined
          based on the conditions of the products and the
          negative balances on the technical accounts brought




      Notes to the Consolidated Financial Statements | Note Added for Translation
284
Notes to the ConsolidatedFinanceiras Subtítulos
Anexo às Demonstrações Financial Statements       285

				
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