Declared Dividends

The table below shows the declared dividends paid on each ordinary share and the equivalent of those dividends expressed in terms of dividends per American Depositary Share, each representing three ordinary shares (the “ADSs”), in each case adjusted for all stock dividends during the relevant periods. The Central Bank requires that we maintain 20% of our net income in legal reserves.

Exchange Rates

The following tables showsshow the annual high, low, average and period-end exchange rate for US$1.00 for the periods indicated. The exchange rate is calculated by the Central Bank based on the information provided by financial entitiesinstitutions on the exchange rate for trading of U.S. dollars for settled transactions in Argentine Pesospesos and U.S. dollars. Such information must be representative of the prevailing market conditions. After gathering this information, the Central Bank calculates the daily exchange rate using the formula set out in Annex I of Communication “A” 3500.

The Federal Reserve Bank of New York does not report a noon buying rate for pesos.

(1) Source: BCRA.

(2) The average of monthly average rates during the period.

The exchange rate on April 22, 201612, 2017 was Ps.14.4558Ps.15.1742 = US$1.00.

Fluctuations in the exchange rate between pesos and dollars affect the dollar equivalent of the peso price of the ordinary shares on the Buenos Aires Stock Exchange (Bolsa(Bolsa de Comercio de Buenos Aires —, the “BCBA”) and as a result, would most likely affect the market price of the ADSs. Fluctuations in exchange rates also affect dividend income measured in dollars. The Bank of New York Mellon, as depositary for the ADSs, is required, subject to the terms of the deposit agreement, to convert pesos to dollars at the prevailing exchange rate at the time of making any dividend payments or other distributions. The following table shows the rate of devaluation of the peso vis-à-vis the dollar at year end, the rate of exchange (number of pesos per dollar prevailing in the Argentine

foreign exchange market at year end) and the rate of inflation for wholesale price for the fiscal yearyears ended December 31, 2016, 2015, 2014, 2013 and for the four most recent fiscal years.2012.

Since the repeal of the Convertibility Law in January 2002, the peso has devalued approximately 1,345.58%1,417.42% vis-à-vis the dollar.

Not applicable.

Not applicable.

Risks Relating to Argentina

Overview

We are an Argentine corporation (sociedad(sociedad anónima)nima), and the vast majority of our operations, properties and customers are located in Argentina. Accordingly, the quality of our assets, our financial condition and our results of operations depend primarily onare significantly affected by macroeconomic and political conditions prevailing in Argentina.

Economic and political instability in Argentina may adversely and materially affect our business, results of operations and financial condition.

The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation. As a consequence, our business and operations have been, and could in the future be, affected from time to time to varying degrees by economic and political developments and other material events affecting the Argentine economy, such as inflation, price controls, foreign exchange controls, fluctuations in foreign currency exchange rates and interest rates, governmental policies regarding spending and investment, national, provincial or municipal tax increases and other initiatives increasing government involvement with economic activity, and civil unrest and local security concerns.

In 2001 and 2002, the Argentine economy suffered a severe economic and political crisis (“(the “Argentine Crisis”). Among other consequences, the Argentine Crisis”Crisis resulted in Argentina defaulting on its foreign debt obligations and introducing emergency measures and numerous changes in economic policies that affected utilities, financial institutions and many other sectors of the economy. Argentina also suffered a significant real devaluation of the peso, which in turn caused numerous Argentine private sector debtors with foreign currency exposure to default on their outstanding debt. Restrictions on deposit withdrawals from the banking system were implemented, as dollar denominated loans and deposits were “pesified” (reclassified as peso-denominated) and maturities reprogrammed. In 2002, inflation soared to 40% while GDP collapsed by almost 11%. Following that crisis, Argentina substantially increased its real gross domestic product (“GDP”) but, growing 8.9% in 2005, 8.0% in 2006, 9.0% in 2007 and 4.1 % in 2008. During 2009, however, the Argentine economy suffered a slowdown attributed to local and external factors, including an extended drought affecting agricultural activities, and the effects of the global economic crisis which led to a contraction of the economy of 5.9% in 2009. Real GDP growth recovered during Nestor Kirchner’s term as President,in 2010 and 2011, increasing to 10.1% and 6.0%, respectively. However, real GDP fell again by 1.0% in 2012 and then grew by 2.4% in 2013. In 2014, the economy underwent another recession and GDP contracted by 2.5%. Finally, real GDP grew by 2.6% in 2015, primarily driven by an increase in public expenditures and investment. The economic and financial environment in Argentina going forward is expected to be significantly influenced by the presidential elections held on November 22, 2015, which endedresulted in 2007. Kirchner was succeeded by Cristina Fernández de Kirchner, who was reelected for another four-year term on October 23, 2011. On December 10, 2015,Mr. Mauricio Macri leader of the opposition party Cambiemos, was sworn in as the newbeing elected President of Argentina after defeating Daniel Scioli, the candidate of President Cristina Fernández de Kirchner’s party, in a runoff presidential election. Since assuming office, theArgentina. The new administration (the “Macri Administration”) has announcedtook office on December 10, 2015 and implemented several significantlaunched a wide array of measures intended to correct longstanding fiscal and monetary policies that had resulted in recurrent public sector deficits, high inflation, pervasive foreign exchange controls and limited

foreign investment. In 2016, the elimination of foreign exchange restrictions and rebalancing of utility rates led to an increase in inflation to 41% year-on-year according to the City of Buenos Aires index at year end and considerable fall in consumption. According to EMAE (a monthly proxy for GDP), economic activity is estimated to have fallen by 2.3%. Sustainable economic growth and improved employment in the medium term will depend upon the manner in which the structural imbalances are addressed and may develop adversely if these policy reforms,issues are not addressed adequately or successfully.

Inflation, any decline in GDP and/or other future economic, social and political developments in Argentina, over which are further described below and which will continue towe have no control, may adversely affect the quality of our assets, our financial condition and ourbusiness, results of operations.operations and financial condition

The impactMacri Administration has implemented significant changes in policy and has announced additional measures, but the ability to successfully implement such additional measures and the eventual outcome of the recent congressional and presidential elections on the future economic and political environment of Argentina is uncertain, but likely to be material.such changes are unknown.

Presidential and congressional elections in Argentina took place in Argentina on October 25, 2015, and a runoff election (ballotage) between the two leading presidentialPresidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected as the new President of Argentina. The Macri Administration assumed office on December 10, 2015.

Since assuming office, the Macri Administration has announced and/or implemented several significant economic and policy reforms including:and announced other intended reforms, including reforms to:

It is expected that the new management team of the INDEC appointed by the Macri Administration will implement certain methodological reforms and adjust certain macroeconomic statistics on the basis of such reforms.

It is too early to predict asFor a description of the date of this annual report the impact that these measures will haveeconomic and policy reforms, see“Item 4. Information on the Argentine economyCompany—Recent Political and our business. There is uncertainty as to whetherEconomic Developments in Argentina—Macri Administration”.

Although we understand the Macri Administration will succeed in implementing all ofbelieves that the national economy has responded largely as expected to the measures implemented to date, the ultimate long-term impact of each of these measures on the national economy as well as the ability to implement all announced during the Presidential election campaign andmeasures as to the timing of their implementation. Even if adopted, such measures may fail to achieve the intended results. Additionally, despite Macri’s victory in the Presidential elections, his party does not have a majority of the seats in Congress, which will require the Macri Administration to seek political support from the opposition for its economic proposals. Further, new unexpected events may develop that create political and/or economic instability in Argentina.currently contemplated cannot be assured. The inabilityability of the Macri Administration to implement itslegislative measures will require obtaining support from opposition parties. The opposition parties did support the passage of the Debt Authorization Law submitted by the Macri Administration or the 2017 Budget Law. If the Macri Administration’s agenda cannot be successfully implemented, including as a result of a lack of political support or otherwisefrom opposition parties in Congress, the result may weaken confidence in and otherwise adversely affect the Argentine economy and its economic and political conditions,financial condition, which could in turn adversely affecthave a material adverse effect on our business, results of operations and financial condition.condition.

High inflation rates could negatively affect the Argentine economy in general, including access to the long-term financing market.

Historically, inflation has materially undermined the Argentine economy and the government’s ability to create conditions that permit growth. In recent years, Argentina has experienced high inflation rates which rose from 26.6% year-on-year in 2013 to 41% year-on-year in 2016 according to the City of Buenos Aires index.

High inflation rates have led to the loss of competiveness of Argentine exports in international markets and to a decline in private consumption, causing a negative effect on economic activity and employment. Moreover, high inflation rates have in the past

and could in the future undermine confidence in the Argentine financial system,sector, in particular with respect to the peso deposit base,

deteriorating reducing the demand for pesos and leading to a portfolio dollarization, which would in turn cause a decrease in the deposit base. This would negatively affect the business volume of banks, including BBVA Francés.

SinceFrom 2007 consumer price index (“CPI”)to mid-2016, the CPI data for the Greater Buenos Aires area (the “CPI-GBA”) and for other Argentine regions/provinces published by the INDEC haswas not been consistent with the CPI data published by private institutions. These inconsistencies created uncertainty regarding the country’s actual inflation rate and made it difficult to anchor inflation expectations. It should be noted that assets,Assets, such as public bonds, indexed to the Benchmark Stabilization Ratio (Coeficiente(Coeficiente de Estabilización de Referencia or “CER”) are adjusted according to the CPI-GBA. Uncertainties concerning official inflation indexes have since been reduced or eliminated with the publication of a credible inflation index by INDEC as discussed below. For more information see“Item 5. Operating and Financial Review and Prospect—Effects of Recent Events on BBVA Francés”.

Argentina’s professional accounting standards require applying Technical Pronouncement No. 6 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE)(“FACPCE”) (as amended by Technical Resolution No. 19), which sets forth that financial statements are to be restated in constant currency when the country’s economic environment exhibits certain characteristics. A prerequisite forIn the application of this pronouncement isevent that inflation as accumulated throughout a three-year period, measured by the so-called Domestic Wholesale Price Index (the “IPIM”) published by the INDEC attains or exceeds 100%. As per the latest information released by the INDEC, inflation accumulated in the period from October 31, 2012 to October 31, 2015 measured by the IPIM index was 66%. Therefore, the prerequisite for restatement into constant currency of the information contained in the consolidated financial statements is not satisfied. If this prerequisite were satisfied, the restatement of the consolidated financial statements in constant currency wouldbecomes mandatory, the adjustment must be mandatory.performed based on the last date on which the Bank adjusted its financial statements to reflect the effects of inflation.

Between January 12 and June 2, 2016, the government issued a series of resolutions designating either the CPI calculated by the government of the City of Buenos Aires, the only institution in Argentina with the statutory authority to produce official nationwide statistics, or the CPI calculated by the Province of San Luis as the index to be used by the Central Bank to calculate the CER. On June 15, 2016, the INDEC published the inflation rate for May 2016 using its new methodology for calculating the CPI. Beginning as of June 26, 2016, the government resumed using the INDEC CPI to calculate the CER. Adjustments and payments on Argentina’s inflation-indexed debt are not subject to restatement or revision.

On June 15, 2016, the INDEC resumed publishing inflation rates, reporting an increase of 4.2% month-on-month in May 2016, 3.1% in June 2016 and 2% month-on-month in July 2016. In February 2014, following the impositionlast quarter of the year, CPI increases for the Greater Buenos Aires area were 2.4% for October 2016, 1.6% for November 2016 and 1.2% for December 2016 using the new INDEC methodology for calculating the CPI. In the past and through the Fernández de Kirchner Administration, the government implemented programs to control inflation and monitor prices for essential goods and services, including attempts to freeze the prices of certain supermarket products, and price support arrangements agreed between the government and private sector companies in several industries and markets that did not address the structural causes of inflation and failed to reduce inflation. In early 2016, the government’s adjustments to electricity and gas tariffs, as well as the increase in the price of gasoline impacted prices, created additional inflationary pressure which resulted in an acceleration of inflation in the first half of 2016.

Inflation remains a challenge for Argentina given its persistent nature in recent years. The Macri Administration has announced its intention to reduce the primary fiscal deficit as a percentage of GDP over time and also reduce the government’s reliance on Central Bank financing by 0.5% of GDP in 2017. If, despite the measures adopted by the Macri Administration, these measures fail to address Argentina’s structural inflationary imbalances, the current levels of inflation may continue and have an adverse effect on Argentina’s economy and financial condition, which could in turn have a material adverse effect on our business, results of operations and financial condition.

The credibility of several Argentine economic indices was called into question in the past, which led to a lack of confidence in the Argentine economy and could affect the evolution of the Argentine economy in the future.

During the presidency of Cristina Fernández de Kirchner, the INDEC, the government’s principal statistical agency, underwent institutional and methodological reforms that gave rise to controversy regarding the reliability of the information that it produced, including inflation, GDP, unemployment and poverty data.

Reports published by the International Monetary Fund (the “IMF”) stated that their staff used alternative measures of certain requirementsinflation for macroeconomic surveillance, including data produced by private sources, which showed inflation rates considerably higher than those published by the INDEC since 2007. The IMF also censured Argentina for failing to improvemake sufficient progress, as required under the Articles of Agreement of the IMF, in adopting remedial measures to address the quality of official data, including inflation and GDP data, Argentina began to reportdata. In February 2014, the INDEC released a new CPIinflation index, known as the National Urban Consumer Price Index (the “CPI NU”), which coversmeasured prices of goods across the whole country and uses a new base year (fourth quarter 2013). The CPI NUreplaced the previous index was first publishedthat only measured inflation in February 2014. The IMF recognized the progress of the Argentine authorities to remedy the inaccurate provision of data, but has delayed the definitive evaluation ofgreater Buenos Aires metropolitan area. Although the new index. The new index replaces the previous measurementmethodology brought inflation statistics closer to those estimated by private sources, there were still significant differences between official inflation data and is used to calculate CER indexation.private estimates.

On January 8, 2016, based on the determination that the INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP and foreign trade data, poverty and unemployment rates, the Macri Administration issued Decree No. 55/2016, declaring thedeclared a state of administrative emergency related tofor the national statistical system and the INDEC until December 31, 2016. The INDEC has thus ceased publishingsuspended publication of certain statistical information untildata pending reorganization of its technical and administrative structure is reorganized.to recover its ability to produce sufficient and reliable statistical information. During the first six months of this reorganization period, which is expected to last between six and eight months, the INDEC is to use thepublished official CPI figures and other statistics published by the City of Buenos Aires and the Province of San Luis andfor reference, as described in“High inflation rates could negatively affect the City of Buenos Aires.Argentine economy in general, including access to the long-term financing market.” above.

Moreover,After revision of the methodology and data compilation in FebruaryJune 2016, the MinisterINDEC began publishing a new CPI index for the Greater Buenos Aires area which showed inflation rates of 4.2% month-on-month in May 2016 and 3.1% month-on-month in June 2016, in line with private estimates. Also in June 2016, the INDEC published revised GDP series for the 2004-2015 period.

In July 2016, an IMF team met officers of the Economy Alfonso Prat-Gay announced thatINDEC and the Argentine finance ministry to discuss the government’s new inflation and gross domestic product statistics and expressed it was pleased with Argentina’s efforts to restore confidence in its official statistics under the Macri Administration. In November 2016, the IMF will conduct inspections inconcluded the Article IV Consultation with Argentina pursuant to Section IVafter 10 years of its last revision. At the by-lawssame time, the Executive Board of the IMF which allows officials to conduct inspectionslifted Censure on Argentina’s official data concluding that Argentina’s CPI and GDP data collection and publication were in line with employers and unions ininternational standards.

In order to make economic recommendationsbe effective, reforms implemented by the INDEC require, however, data to member countries.

Althoughbe collected on a timely basis and the Macri Administration has consistently informed that onecontinuous implementation of its main goals is to control and reduce of inflation, it remains uncertain as of the date of this annual report whether the reforms described above will be implemented as planned, and whether, even if implemented, will be successful at all. It is also uncertain the extent to which official data will be reviewed and what effectcorrect methodologies. If these reforms will have onfail to sustain credibility, such failure may adversely affect the Argentine economyeconomy. The INDEC’s past or our consolidated financial statements. No assurance can be given as to the reliability of the officialfuture data as the INDEC’s dataalso may be materially revised at any time andto reveal a different historicaleconomic or prevailing economic conditions and performance from those previously believed,financial situation in Argentina, which could affect investment decisions in turn affect the credibilitycountry. All of Argentina and its economic and political conditions. All these factors could adversely affect our business, results of operations and financial condition.conditions.

A considerable increase in the government’s expenditure could negatively affect the Argentine economy and its access to international financial markets.

Starting in 2005, public expenditures began to increase faster than public revenues and the primary fiscal balance of the national public non-financial sector went from a surplus of 3.2% of GDP in 2004 to a deficit of 5.3%5.4% of GDP in 2015. The fiscalIn 2016, the primary deficit deteriorated during 2015, reaching Ps. 225.6 billion as of the year end,was Ps.359.4, which represented a 105.6%an increase of 52.9% compared with the 2014 fiscal deficit.previous year, because the reduction of export duties and the income tax reform negatively impacted revenue growth while the reduction in subsidies to the energy and transport sectors was slower than expected. The Macri Administration announced gradual adjustments to the primary fiscal deficit, of around 5 percentage pointswhich is expected to decline to -2.2 % of GDP per year untilin 2019. Most of the fiscal adjustments are intended to come from the elimination of the subsidies to the energy sector, a measure which is currently being implemented, while primary spending is expected to remain constant in real terms as revenues recover on the reductionback of the overall tax burden, the reduction of export duties and the income tax reform announced by the Macri Administration.economic growth.

Any further deterioration of the government’s fiscal position, however, would negatively affect its ability to access the debt markets and could in turn result in more limited access to such markets by Argentine companies, including BBVA Francés.

Moreover, in 2016 the former government has started issuing debt in the local Argentine market again after a number of years without it,any such issuance, which Argentine private banks, such as BBVA Francés, often purchase. The Macri Administration has announced that it will continue to issue debt in the local Argentine market and this could lead to increased exposure of private banks, such as BBVA Francés, to the public sector.

The Macri Administration has undertaken important steps to curb the fiscal deficit through a series of tax and other measures aimed at increasing revenues, reducing energy, gas and transport subsidies and controlling public expenditures. However, we cannot assure that such measures will be successful or sufficient to reduce the fiscal deficit.

Certain programs recently announced by the Macri Administration may also increase public expenditures, including the bill for thePrograma de Reparación Histórica para Jubilados y Pensionados (Historical Reparations Program for Retirees and Pensioners) passed on June 29, 2016, which, if implemented, would require retroactive compensation in an aggregate amount of more than Ps. 47.0 billion and an investment of up to Ps. 75.0 billion to cover all potential beneficiaries. The funding is expected to be generated in part through revenues raised under a tax amnesty proposed in the same bill. However, these revenues may be insufficient to offset such increases in public expenditures, which may increase the fiscal deficit.

It is uncertain whether the Macri Administration will succeed in implementing its strategy to reduce the fiscal deficit and public expenditures, particularly in light of the fact that any measures subject to congressional approval will require support from the opposition. Failure to implement these policies, or if they prove ineffective, could increase the fiscal deficit, negatively impact

consumers’ purchasing power and lead to overall higher prices. Furthermore, the government’s primary fiscal balance could be negatively affected if public expenditures continue to increase in the future. A weaker fiscal position could have a material adverse effect on the government’s ability to obtain long-term financing and adversely affect economic conditions in Argentina, which could adversely affect our business, results of operations and financial condition.

Holdout creditors who participated in the debt exchange that took place in 2005 and 2010 have filed numerous lawsuits against Argentina in several jurisdictions, including the United States, which have resulted in limitations on the country’s ability to make payments on certain of its outstanding debt and access the international capital markets. It cannot be assured that further litigation against Argentina will not negatively affect its assets or Argentina’s ability to access the international capital markets.

In 2005 and 2010, Argentina conducted exchange offers (the “Exchange Offers”) to restructure part of its sovereign debt that had been in default since the end of 2001 (the “Defaulted Debt”). As a result of the Exchange Offers, Argentina restructured over 92% of its eligible Defaulted Debt. Holders of Defaulted Debt who participated in the Exchange Offers (the “Exchange Bondholders”) obtained new bonds with different terms (the “Exchange Bonds”).

Bondholders who did not participate in the Exchange Offers (the “Holdouts”) have obtained favorable rulings in the U.S. District Court for the Southern District of New York (the “District Court”) ordering the payment by Argentina of the principal amount and interest due on their bonds. The District Court held that repaying the Exchange Bondholders but not the Holdouts would violate the pari passu clause of the bonds held by the Holdouts and enjoined Argentina from making any payment on the Exchange Bonds unless similar payments were made to the Holdouts (the “Pari Passu Injunctions”). The U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) upheld the District Court’s rulings on several occasions and ordered Argentina to pay US$1.3 billion plus post-judgment interest to the Holdouts. The Second Circuit stayed its decision pending Argentina’s appeal to the U.S. Supreme Court (the “Supreme Court”). On June 16, 2014 the Supreme Court declined to review the Second Circuit’s decision and the stay was lifted shortly thereafter.

By denying Argentina’s petition for review, the Supreme Court upheld the Second Circuit’s decision ordering Argentina to pay US$1.3 billion to the Holdouts. While the Argentine government has repeatedly stated its intention to pay the full amount only to the Exchange Bondholders, any potential payment to the Exchange Bondholders not accompanied by a similar payment to the Holdouts could be blocked based on the decision of the Second Circuit. On June 30, 2014, the deadline for the payment of interest installments on certain Exchange Bonds expired. The government transferred the necessary funds to the trustee, the Bank of New York Mellon, to make the payment, but the funds were blocked by the District Court. On July 30, 2014, the grace period expired for payment of said interest installments and the payments had not yet been cleared. On September 11, 2014, the Argentine government passed Law 26,984 (the “Sovereign Payment Law”) replacing Bank of New York Mellon with a local Argentine bank, Nación Fideicomisos S.A. in the city of Buenos Aires, as trustee. With this law the government sought to create a new voluntary exchange of restructured debt. Furthermore, in August 2014, the Central Bank revoked the license of the Bank of New York Mellon to act in Argentina. On September 29, 2014, the District Court held Argentina in contempt, due to its attempts to make payments to the Exchange Bondholders but not to the Holdouts, in defiance of the District Court’s orders.

In February 2016, the Macri Administration announced initial agreements with several groups of Holdouts and made a settlement proposal to all other Holdouts, including those with pending claims in U.S. courts. In turn, in March 2, 2016, the District Court ordered the Pari Passu Injunctions, including the so-called “me too injunctions” (injunctions carried out by other creditors which were not included in the original Holdouts’ claim) to be automatically vacated once (i) Argentina repeals Law No. 26,017 issued during Fernández de Kirchner Administration under which the government would not make payments to Holdouts and also repeals the Sovereign Payment Law, and (ii) Argentina pays in full the parties who have entered into settlement agreements on or before February 29, 2016 (the “March 2 Order”). On March 31, 2016, Congress approved the so-called Debt Authorization Law repealing the legislative obstacles to settle claims with Holdouts and approving the settlement proposal. The Court of Appeals affirmed the March 2 Order and instructed the District Court to monitor and confirm that the actual payment to the Holdouts takes place under the terms of the relevant agreements.

On April, 22, 2016, Argentina began the process of tranferring the funds for the payment to the holdouts in order to terminate the default situation of 2001 and the 15-year trail. The payment was split between US$6,200 million to be paid directly by a transfer of funds for those holdouts who signed an agreement with the Macri Administration before February 29, 2016 and another US$3.1 billion to be transfered to a trust in the Bank of New York for those who reached an agreement to after that date. After these payments, Judge Thomas Griesa decided to lift the precautionary measures.

Not all creditors have agreed to settle on the Macri Administration´s proposed terms and other holders of untendered debt who have not yet agreed to the settlement proposal of the Macri Adminsitration litigation continue in the United States and other jurisdictions, and the consequences of potentially inconsistent rulings from different courts are unclear. As a result of this continuing and potential future litigation, it cannot be assure that further judgements, injuctions or attachments orders could not lead to the freezing or attachment of some of Argentina’s assets, which could have a material adverse effect on the Argentine economy and affect our ability to access international financing or pay our debts.

The Argentine economy remains vulnerable to external events that could be caused by significant economic difficulties of Argentina’s major regional trading partners, particularly Brazil, or by more general “contagion” effects, whichincluding those precipitated by the United Kingdom’s impending departure from the European Union and the economic policy of the new government of the United States. Such external events and “contagion” effects could have a material adverse effect on Argentina’s economic growth and its ability to service its public debt.debt, and, as a result, on our business.

Weak, flat or negative economic growth of any of Argentina’s major trading partners, such as Brazil, could adversely affect Argentina’s balance of tradepayments and, consequently, Argentina’s economic growth.

In 2015 and 2016, the economy of Brazil, is currently Argentina’s largest export market.market and the principal source of imports, experienced heightened negative pressure due to the uncertainties stemming from its political crisis, including the removal of Ms. Dilma Rousseff as President from office. The Brazilian GDP decreasedeconomy contracted by 3.8 %3.8% during 2015, mainly due to a 8.3% decrease in industrial production. In addition, theproduction, and further decreased by 3.6% in 2016. The Brazilian

real depreciated by 33% against the U.S. dollar by approximately 49.1% from January 2015 to February 2016, the largest depreciation in over a decade, in an attempt to increase exports, before appreciating by 15.98% between March, 2016 and February, 2017. Any further deterioration of economic conditions in Brazil may reduce demand for Argentine exports and increase demand in Argentina for Brazilian imports. While the courseimpact of 2015, according toBrazil’s downturn on Argentina cannot be predicted, it is possible that the Brazilian institute of geographypolitical and statistics (Instituto Brasilero de Geografíeconomic crisis could have a y Estadística, IBGE).

Moreover, Brazil is currently undergoing an internal political crisis as its congress initiated an impeachment process againstfurther negative impact on the current President Dilma Russeff, who faces charges of manipulating the budget deficit and attempt to obstruct an investigation of a potential multibillion-dollar bribery scheme at Petrobras, the state-controlled oil giant.Argentine economy.

The Argentine economy may also be affected by “contagion” effects. International investors’ reactions to events occurring in one developing country sometimes appear to follow a “contagion” pattern, resulting in which an entire region or investment class beingis disfavored by international investors. In the past, the Argentine economy has been adversely affected by such contagion effects on a number of occasions, including the 1994 Mexican financial crisis, the 1997 Asian financial crisis, the 1998 Russian financial crisis, the 1999 devaluation of the Brazilian real, the 2001 collapse of Turkey’s fixed exchange rate regime and the global financial crisis that began in 2008.

The Argentine economy may also be affected by conditions in developed economies, such as the United States, that are significant trading partners of Argentina or have influence over world economic cycles. For example, ifA more protectionist trade policy from the new government of the United States could affect world trade with negative repercussions for Argentina. If interest rates increase significantly in developed economies, including the United States and Europe (particularly as a result of the United Kingdom’s vote in favor of leaving the European Union on June 23, 2016 and the commencement of the official path for departure from the EU (the “Brexit”), Argentina and its developing economy trading partners, such as Brazil, and other developing economies, could find it more difficult and expensive to borrow capital and refinance existing debt, which could adversely affect economic growth in those countries. The perceptions as to the impact of the withdrawal of the United Kingdom from the European Union may adversely affect business activity and economic and market conditions in the United Kingdom, the Eurozone and globally, and could contribute to instability in global financial and foreign exchange markets. In addition, Brexit could lead to additional political, legal and economic instability in the European Union.

Any of these factors could adversely affect Argentine economic growth. As an Argentine bank, any of these factorsconditions in Argentina which would in turn adversely affect our business, results of operations and financial condition.conditions.

A decline in international prices for Argentina’s principal commodity exports could have a material adverse effect on Argentina’s economy and public finances.finances, and, as a result, on our business.

Commodities markets have historicallyHistorically, the commodities market has been characterized by high volatility. Despite the volatility of prices of most of Argentina’s commodities exports, commodities have significantly contributed to the government’s revenues during recent years. Consequently,years due to the imposition of export duties on agricultural products in 2002. Although most duties were eliminated and the export tax on soy was reduced from 35% to 30% by the Macri Administration in 2016, the Argentine economy has remainedis still relatively dependent on the price of its main agricultural exports, primarily soy. This dependence, has, in turn, renderedrenders the Argentine economy more vulnerable to fluctuations in commodity prices. A declineprices fluctuations. International commodities prices decreased during 2015 but partially recovered during 2016. Declines in commodity prices may adversely affect the Argentine economy, as well as its public finances due to a decreaseand the government’s fiscal revenues, which could in government revenue from export taxes. Asturn adversely affect our business, results of operations and financial condition.

While the date of this annual report, the Macri Administration has eliminated export taxes on many agricultural products and reduced the export taxes on soy from 35% to 30%. Any reduction in commodity prices or further reductionlowering of export taxes could negatively impactimplemented in 2016 was intended to encourage exports, reductions in export taxes in the future, unless replaced with other sources of revenues, may adversely affect the Argentina’s public finances, which could in turn adversely affect our business, results of operations and financial condition.

The relatively low levelExchange controls and restrictions on capital inflows and outflows could have a material adverse effect on Argentine public sector activity, and, as a result, our business.

In 2001 and 2002, following a run on the financial sector triggered by the public’s lack of international reserves could leadconfidence in the continuity of the convertibility regime that resulted in massive capital outflows, the government introduced exchange controls and restrictions on the transfer of foreign currency in an attempt to prevent capital flight and a further depreciation of the peso if there is an abrupt increase inpeso. These exchange controls substantially limited the ability of issuers of debt securities, among others, to accumulate or maintain foreign currency demand byin Argentina or make payments abroad.

Although several of such exchange controls and transfer restrictions were subsequently suspended or terminated, in June 2005 the publicgovernment issued a decree that established new controls on capital flows, which resulted in a decrease in the new floating exchange rate system.availability of international credit for Argentine companies.

The level of international reserves of the Central Bank has increased by more than 4 billion dollars sinceIn addition, from 2011 until the Macri Administration took office even though there has been virtually noin December 2015, the government increased controls on the sale of foreign currency and the acquisition of foreign assets by local residents, limiting the possibility of transferring funds abroad. Together with regulations established in 2012 that subjected certain foreign exchange transactions to prior approval by Argentine tax authorities or the Central Bank, intervention inthese measures significantly curtailed access to the foreign exchange market. In response, an unofficial U.S. dollar trading market sincedeveloped in which the removal of certainpeso-U.S. dollar exchange rate differed substantially from the official peso-U.S. dollar exchange rate.

The Macri Administration has substantially eliminated all foreign exchange restrictions. The Central Bank is now committed to a policyrestrictions that developed under the Fernández de Kirchner regime. See “—Fluctuations in the value of floating exchange rates in order to deviate from the devaluation-inflation dynamics that have affectedpeso could adversely affect the Argentine economy in recent years. Duringand the first 100 days in office ofRepublic’s ability to service its debt obligations.” below. Notwithstanding the measures recently adopted by the Macri Administration, if in the future the Central Bank obtained a loan of US$5 billion from a group of sevenand/or the government re-introduce exchange controls and impose restrictions on transfers abroad, such measures may negatively affect Argentina’s international bankscompetitiveness, discourage foreign investments and increase foreign capital outflows, which could have an adverse effect on economic activity in order to strengthen its international reserves.Argentina.

For the same purpose, during December 2015, the Central Bank also converted Chinese Yuans into U.S. dollar in an amountAny of US$3 billion under the terms of the swap currency agreement with China. This currency swap was originally made for the equivalent of US$11 billionand, although the funds were recordedthese factors could have a material adverse effect on the Central Bank’s balance sheet, they were not considered as available liquidity. The swap agreement already contemplated the possibility of the conversion of Chinese Yuans into U.S. dollars at a cost and the fact that the IMF officially accepted the Yuan as a reserve currency further facilitated the transaction. The current stock of international reserves held by the Central Bank subtracting the currency swap with China and the US$5 billion loan with international banks is relatively low, which would reduce the capacity of the Central Bank to endure a hypothetical increase in demand of foreign currency.

Moreover, because of the final agreement reached with the Holdouts, the Central Bank received US$7,200 million to be added to reserves due to the oversubscription of the debt issued to pay the holdouts and exit the default.

A low level of international reserves could lead to a further depreciation of the peso, if there is an abrupt increase in foreign currency demand, which could in turn adversely affect our business, results of operations and financial condition.

The Macri Administration has begun to implement significant measures to solve the current energy sector crisis, but the eventual outcome of such measures is unknown.

Economic policies since the Argentine Crisis have had an adverse effect on Argentina’s energy sector. The failure to reverse the freeze on electricity and natural gas tariffs imposed during the Argentine Crisis created a disincentive for investments in the energy sector. Instead, the government sought to encourage investment by subsidizing energy consumption. The policy proved ineffective and operated to further discourage investment in the energy sector and caused production of oil and gas and electricity generation, transmission and distribution to stagnate while consumption continued to rise. To address energy shortages starting in 2011, the government attempted to increase imports of energy, with adverse implications for the trade balance and the international reserves.

In response to the growing energy crisis, the Macri Administration declared a state of emergency with respect to the national electricity system, which will be in effect until December 31, 2017. The state of emergency allows the government to take actions designed to stabilize the supply of electricity to the country, such as instructing theMinisterio de Energía y Minería de la Nación (Ministry of Energy and Mining) to design and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electricity system. In addition, the Macri Administration announced the elimination of certain energy subsidies and significant adjustments to electricity rates to reflect generation costs.

Additionally, the Macri Administration announced the elimination of a portion of subsidies to natural gas and adjustment to natural gas rates. As a result, average electricity and gas prices have already increased and could increase further. However, certain of the government’s initiatives relating to the energy and gas sectors were challenged in the Argentine courts and resulted in judicial injunctions or rulings against the government’s policies, which were later lifted as the legal objections were overcome.

The Macri Administration has taken steps and announced measures to address the energy sector crisis while taking into consideration the implications of these price increases for the poorest segments of society by approving subsidized tariffs for qualifying users. Failing to address the negative effects on energy generation, transportation and distribution in Argentina with respect

to both the residential and industrial supply, resulting in part from the pricing policies of the prior administrations, could weaken confidence in and adversely affect the Argentine economy, lead to social unrest and political instability, and adversely affect the Republic’s ability to service its debt. There can be no assurance that the measures adopted by the Macri Administration to address the energy crisis will not be challenged in the local courts in the future and/or be sufficient to restore production of energy in Argentina within the short or medium term.

Any failure by the Macri Administration to solve the current energy crisis could have a material adverse effect on Argentine economy, which could in turn have a material adverse effect on our business, results of operations and financial condition.

Any failure to adequately address actual and perceived risks of institutional deterioration and corruption may adversely affect Argentina’s economy and financial condition.

The lack of a solid institutional framework and corruption have been identified as, and continue to be a significant problem for Argentina. In Transparency International’s 2016 Corruption Perceptions Index survey of 176 countries, Argentina ranked #95. In the World Bank’s Doing Business 2016 report, Argentina ranked #121 out of 189 countries, up from #124 in 2015.

Recognizing that the failure to address these issues could increase the risk of political instability, distort decision-making processes and adversely affect Argentina’s international reputation and ability to attract foreign investment, the Macri Administration has announced several measures aimed at strengthening Argentina’s institutions and reducing corruption. These measures include reducing criminal sentences in exchange for cooperation with the government in corruption investigations, increasing access to public information, seizing assets from corrupt officials, increasing the powers of the Anticorruption Office (Oficina Anticorrupción) and the passing of a new public ethics law, among others. The government’s ability to implement these initiatives is uncertain as it requires the involvement of the judicial branch, which is independent, as well as legislative support from opposition parties. No assurances can be given that the implementation of these measures will be successful.

Any failure by the Macri Administration to adequately address actual and perceived risks of institutional deterioration and corruption may adversely affect Argentina’s economy and financial condition, which could in turn have a material adverse effect on our business, results of operations and financial condition.

Fluctuations in the value of the peso could adversely affect the Argentine economy and the Republic’s ability to service its debt obligations.

Fluctuations in the value of the peso may adversely affect the Argentine economy. The devaluation of the peso may have a negative impact on the government’s revenues (measured in U.S. dollars), fuel inflation and significantly reduce real wages. After several years of moderate variations in the nominal exchange rate, the peso lost more than 33% of its value with respect to the U.S. dollar in each of 2014 and 2015, and approximately 38.5% in 2016.

Persistent high inflation during this period, with formal and “de facto” exchange controls, resulted in an increasingly overvalued real official exchange rate. Compounded by the effects of foreign exchange controls and restrictions on foreign trade, these highly distorted relative prices resulted in a loss of competitiveness of Argentine production, impeded investment and resulted in economic stagnation during this period. For a description of the measures taken by the Macri Administration to address these issues, see“Item 4. Information on the Company—Recent Political and Economic Developments in Argentina—Macri Administration”.

A significant appreciation of the peso against the U.S. Dollar also presents risks for the Argentine economy, including the possibility of a reduction in exports as a consequence of the loss of external competitiveness. Any such appreciation could also have a negative effect on economic growth and employment and reduce tax revenues in real terms.

From time to time, the Central Bank may intervene in the foreign exchange market in order to maintain the currency exchange rate. Additional volatility, appreciations or depreciations of the peso or reduction of the Central Bank’s reserves as a result of currency intervention could adversely affect the Argentine economy and the Republic’s ability to service its debt obligations.

Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

There can be no assurances that the Republic will be able to obtain financing on satisfactory terms in the future, which could have a material adverse effect on the Republic’s ability to make payments on its outstanding public debt.

The Republic’s future tax revenue and fiscal results may be insufficient to meet its debt service obligations and the Republic may have to rely in part on additional financing from domestic and international capital markets in order to meet future debt service obligations. However, the Republic may not be able to access international or domestic capital markets at acceptable prices or at all, and, if that is the case, the Republic’s ability to service its outstanding public debt could be adversely affected ,which could in turn adversely affect Argentina’s economy and financial condition and thereby havea material adverse effect on our business, results of operations and financial condition.

Risks Relating to the Argentine Financial System and to BBVA Francés

The short-term structure of the deposit base of the Argentine financial system, including the deposit base of the Bank, could lead to a reduction in liquidity levels and limit the long-term expansion of financial intermediation.

After the Argentine Crisis, the volume of financial activity regarding deposits and loans was severely reduced. Between 2003 and 2007, a gradual and increasing recovery of deposit levels took place. As a result of the global financial crisis, deposit levels decreased again during 2008 until the last semester of 2009 but they have been increasing since then. As result of the implementation of the tax amnesty regime in 2016, the deposits base registered a significant growth in 2016.

TheIn recent years, growth of the Argentine financial system issector has been heavily dependent on deposit levels because of the small size of the Argentine capital markets and the lack of access to foreign capital markets. Since the Macri Administration took office, access to foreign capital markets may be possible again to support credit growth in recent years. Inaddition to the medium term, the growth of credit will likely depend on the growth of deposit levels. base.

During the 2011-2013 period, credit grew at a higher rate than deposits, thereby consuming excess liquidity of financial institutions. InSince 2014, this scenario started to change, and deposits started to grow at a higher rate than credit.

The liquidity of the Argentine financial system at the present datesector is currently relatively high due to the high level of mandatory deposit reserves applicable to Argentine financial entities,institutions, among other short-term investments, such as repurchase transaction entered into by certain Argentine banks, including BBVA Francés with the Central Bank.Bank on March 2016. These liquid assets account for approximately 20%34.7% of the total deposits of the Argentine financial entitiesinstitutions as of December 31, 2015.2016. Banks can also invest in short-term Central Bank bills (Lebac)(“LEBAC”) which also increase the liquidity ratios of the financial system.sector.

Notwithstanding that,the above, because most deposits are short-term deposits, a substantial part of loans must also have short-term maturities to match the terms of the deposits. The proportion of long-term credit lines, such as mortgages, is small.

We have a continuous demand for liquidity to fund our business activities. Our profitability or solvency could be adversely affected if access to liquidity and funding is constrained or made more expensive for a prolonged period of time. Furthermore, withdrawals of deposits or other sources of liquidity may make it more difficult or costly for us to fund our business on favorable terms. Although we believe that deposit liquidity levels are currently reasonable, no assurance can be given that those levels will not be reduced due to future negative economic conditions or otherwise. If depositors lose confidence as a result of negative economic conditions or otherwise and withdraw significant funds from the banks,financial institutions, there will be a substantial negative impact on the manner in which financial institutions, including us, conduct their business and on their and our ability to operate as financial intermediaries. If Argentine financial institutions, such as BBVA Francés,we are unable to access adequate sources of medium and long-term funding or if theywe are required to pay high costs in order to obtain the same and/or if theywe cannot generate profits and/or maintain theirour current volume and/or scale of theirour business, whether due to a decline in deposits or otherwise, our liquidity position and ability to honor our debts as they come due may be adversely affected.

The instabilitySignificant growth of peso cash (physical bills) positions in the Bank could have an adverse impact on our results of operations.

Since 2012, the Argentine Central Bank’s charter states that peso cash balance in physical bills cannot be used by financial institutions to comply with liquidity reserve requirements. As a result, the Bank has sought to minimize its cash balances, as they yield no income.

BBVA Francés’ business model contemplates the collection of a substantial amount of bills from large retail corporations as a way to promote business within the retail sector. Collecting bills generates a surplus of bills that the Bank used to deposit in its current account in Central Bank and then allocated to profitable assets.

During 2016 the Central Bank started to show reluctance to receive bills from financial institutions and, consequently, our peso bills balance increased above normal levels, adversely affecting our income as those funds yielded zero interest.

We believe that for the Central Bank, the banks have a key role in its purpose of reducing the informal economy as well as reducing the amount of bills. However, considering the current situation, as the extent of the regulatory framework,informal economy in particular the regulatory framework affecting financial institutions,country is high and multi sectorial efforts and regulation are needed to address the problem, this could take some time to be solved.

The excess of bills in the economy will take time to solve, as the extent of the informal economy in the country is high and multi sectorial efforts and regulation are needed to address the problem. Meanwhile, if the Central Bank maintains its decision of not accepting bills, we could end up with a higher balance of this kind of asset, which could have a material adverse effect on financial institutions such as the Bank.

During Cristina Kirchner’s second term as President a series of new regulations were issued affecting financial institutions, mainly regulating the foreign exchange market and imposing new capital requirements for financial institutions. In this regard, Communications “A” 5272 and 5273 of the Central Bank, dated February 1, 2012, increased the capital requirements for financial institutions carrying out activities in Argentina. These Communications required certain minimum capital levels in order to support operational risks and the distribution of dividends, and an additional capital buffer equivalent to 75% of the total capital requirements. The Central Bank stated that these new requirements were based on the credit risk measure required by Basel II. For more information regarding capital requirements for Argentine banks please see“Item 4. Information on the Company—F. The Argentine Banking System”. Moreover, a new law was approved by the Congress introducing amendments to the Central Bank’s charter. The principal issues addressed by this bill were the use of Central Bank’s reserves for the cancellation of public debt together with the implementation of polices by the Central Bank in order to interfere in the determination of interest rates and terms of loans to financial institutions.

The Central Bank issued Communications “A” 5319 and “A” 5380, dated July 5, 2012 and December 21, 2012, respectively, and Communication “A” 5516, dated December 27, 2013, making it mandatory for banks to provide credit lines for productive purposes. The government’s intention was to increase investments, although an increase in the demand for these loans could in turn lower the demand for other types of loans. BBVA Francés used approximately Ps.6,691 million in 2015 for these types of loans.

On November 29, 2012, the Argentine Congress passed the new “Securities Law”, which modified the public offer regime set forth by Law No. 17,811, as amended. One of the most significant amendments introduced by the Securities Law referred to the powers of the CNV. The adoption of Section 20 of the Securities Law raised concern in the market, especially among listed companies, since it entitles the CNV to (i) appoint supervisors with veto power over the resolutions adopted by the board of directors of listed companies and (ii) disqualify the board of directors of listed companies for a period of 180 days when, as determined by the CNV, the interests of the minority shareholders and/or security holders are adversely affected.

On October 1, 2013, the Central Bank issued Communication “A” 5460, granting broad protections to consumers of financial services, including, among other aspects, the regulation of fees and commissions charged by financial institutions for their services. As a result, fees and charges must represent a real, direct and demonstrable cost and should have technical and economic justification. Communication “A” 5514 introduced an exception to the application of Communication “A” 5460 for certain credit agreements that have pledges as collateral and are entered into before September 30, 2019.

On December 23, 2014, the Central Bank amended Communication “A” 5460 through Communication “A” 5685. As a result of this amendment, any increase in commissions for new products or services for retail customers must have the prior authorization of the Central Bank.

Additionally, according to Central Bank Communication “A” 5689, dated January 8, 2015, financial entities must deduct from the potential dividend distributable amount any fine imposed by the Central Bank, the CNV and theUnidad de Información Financiera(the Argentine anti-money laundering agency, “UIF”).

While the Macri Administration has repealed part of the regulatory framework enacted by the Fernández de Kirchner Administration, such as (i) the restrictions on the foreign exchange market, (ii) the regulations concerning minimum and maximum interest rates on certain loans and deposits, (iii) the requirements governing the flow of capital into Argentina, (iv) the percentage of foreign currency positions of financial entites, (v) the monthly contributions that banks must set aside each month to fund the deposit gurantee fund, (vi) and additional capital requieremnts, it is still early to know whether the new regulatory framework will be stableandthe impact that the new regulatory framework may have on the Bank’s business. The absence of a stableregulatory framework or a new regulations that may affect the banks business could limit the ability of financial institutions, including BBVA Francés, to make long-term decisions, such as asset-allocation decisions, and that could cause uncertainty with respect to our future business, results of operations and financial condition.

Although the Bank is currently analyzing measures to offset this impact, such as raising the fees we charge for the collection service or reducing the net amount of bills we receive from customers every month, no assurance can be given as to the potential results of these measures. Therefore, a significant growth of peso cash (bills) positions in the Bank could have an adverse impact onour business, results of operations and financial condition.

Our estimates and established reserves for credit risk and potential credit losses may prove to be inaccurate and/or insufficient, which may materially and adversely affect our results of operations and financial condition.

A number of our products expose us to credit risk, including consumer loans, commercial loans and other receivables. Changes in the income levels of our borrowers, increases in the inflation rate or an increase in interest rates could have a negative effect on the quality of our loan portfolio, causing us to increase provisions for loan losses and resulting in reduced profits or in losses. We cannot assure that lawsestimate and regulations currently governingestablish reserves for credit risk and potential credit losses. This process involves subjective and complex judgments, including projections of economic conditions and assumptions on the financial sector willability of our borrowers to repay their loans. We may not continuebe able to changetimely detect these risks before they occur, which may increase our exposure to credit risk. Overall, if we are unable to effectively control the level of non-performing or poor credit quality loans in the future, or if the loan loss reserves are insufficient to cover future loan losses, this would have a material adverse effect on our business, results of operations and financial condition.

Reduced spreads between interest rates received on loans and those paid on deposits without corresponding increases in lending volumes could adversely affect our profitability.

The spread for Argentina’s financial sector between the interest rates on loans and deposits could be affected as a result of increased competition in the banking sector and the government’s tightening of monetary policy in response to inflation concerns. During recent years, the financial sector has registered in Argentina an increase in interest rates. The relative weight of demand deposits as sources of liquidity in the Argentine financial system results in an increase of spreads between interest rates received on loans and those paid on deposits. If inflation declines a decrease in interest rates should occur, which should in turn result in a higher demand of credit. However, we cannot guarantee that any changesan increase in the volume of lending will occur. Any failure to increase the volume of lending could have an adverse effect on our business, results of operations and financial condition.

Increased competition in the banking industry may adversely affect the Bank’s operations.

The markets in which we operate are highly competitive and this trend will likely continue. In particular, we expect that competition with respect to small- and medium-sized businesses is likely to increase. As a result, even if the demand for financial products and services from these markets continues to grow, competition may adversely affect our results of operations by decreasing the net margins we are able to generate. In addition, the trend towards consolidation in the banking industry has created larger and stronger banks with which we must now compete. We also face competition from non-bank competitors, such as payment platforms, e-commerce businesses, department stores (for some credit products), automotive finance corporations, leasing companies, factoring companies, mutual funds, pension funds, insurance companies, crowdfunding platforms and public debt. There can be no assurance that this competition will not adversely affect our business, results of operations and financial condition.

Argentine corporate disclosure, governance and accounting standards may require the BankOur business is particularly vulnerable to provide different information than would be required under U.S. standards. This difference could influence foreign investors’ decisions to investvolatility in Argentine securities and could therefore limit the Bank’s access to international markets.interest rates.

The securities laws of Argentina that govern publicly-listed companies such as the Bank impose disclosure requirements that are more limited than those in the United States. The Argentine securities markets are not as highly regulated and supervised as the U.S.

Our results of operations are substantially dependent upon the level of our net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Interest rates are highly sensitive to many factors beyond our control, including fiscal and monetary policies of governments and central banks, regulation of the financial sector in the market in which we operate, domestic and international economic and political conditions and other factors.

securities markets. There are also important differences between accounting and financial reporting standards applicableIn the current Argentine scenario where the government attempts to financial institutions in Argentina and thosestabilize high inflation rates, there is a risk of volatility in the United States.interest rates. This scenario could adversely affect our financial margin as a result of differential movements in interest rates for deposits, loans or other bank assets and liabilities. In addition, a high proportion of loans referenced to variable interest rates makes debt service on such loans more vulnerable to changes in interest rates. In addition, a rise in interest rates could reduce the demand for credit and our ability to generate credit for our clients, as well as contribute to an increase in the credit default rate. As a result financial statements and reported earnings of Argentine financial institutions generally differ from those reported based on U.S. accounting and reporting standards. See“Item 5. Operating and Financial Review and Prospects—U.S. and Argentine Banking GAAP Reconciliation” for a description of the principal differences between Argentine banking GAAP and U.S. GAAP and how they affect our financial statementsthese and the reconciliation to U.S. GAAP of net income and total stockholders’ equity forabove factors, significant changes or volatility in interest rates could have a material adverse effect on the periods ended and as of the dates therein indicated.

Accordingly, the information available about the Bank will not be the same as the information available about a U.S. company. The difference in the disclosure requirements between Argentine corporate governance and accounting standards and U.S. GAAP could limit foreign investors’ ability to evaluate our business, results of operations and financial condition,condition.

Our credit ratings depend on sovereign credit ratings, and influence foreign investors’ decisions whether to invest in Argentine securities, thereby limiting the Bank’ssuch dependence limits our access to international financial markets.

Our credit ratings are based on Argentina's sovereign rating, which has fluctuated considerably since the Argentine Crisis. As a result, our ratings have also fluctuated in this period, although they have tended to be higher than the sovereign rating. These fluctuations impact our costs of funding, our collateral obligations and our ability to access international markets. Although Argentina is no longer in default following the final agreement reached with certain the holders of bonds issued by the Republic (holdouts), a decrease in, Argentina’s sovereign rating could limit our access to financing or make such financing more expensive for us, even if available, which could in turn adversely affect our business, results of operations and financial condition.

The financial industry is increasingly dependent on information technology systems, which may fail, may not be adequate for the tasks at hand or may no longer be available.

Banks and their activities are increasingly dependent on highly sophisticated information technology (“IT”) systems. IT systems are vulnerable to a number of problems, such as software or hardware malfunctions, computer viruses, hacking and physical damage to vital IT centers. IT systems need regular upgrading and banks, including us, may not be able to implement necessary upgrades on a timely basis or upgrades may fail to function as planned. Furthermore, failure to protect financial industry operations from cyber-attacks could result in the loss or compromise of customer data or other sensitive information.See “—Cybersecurity events could negatively affect our reputation, results of operations and financial condition.”below. These threats are increasingly sophisticated and there can be no assurance that the Bank will be able to prevent all breaches and other attacks on its IT systems. In addition to costs that may be incurred as a result of any failure of IT systems, the Bank could face fines from bank regulators if it fails to comply with applicable banking or reporting regulations. Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

Cybersecurity events could negatively affect our reputation, results of operations and financial condition.

We depend on the efficient and uninterrupted operation of internet-based data processing, communication and information exchange platforms and networks, including those systems related to the operation of our automated teller machine (“ATM”) network. We have access to large amounts of confidential financial information and control substantial financial assets belonging to our customers as well as to us. In addition, we provide our customers with continuous remote access to their accounts and the possibility of transferring substantial financial assets by electronic means. Accordingly, cybersecurity is a material risk for us. Cybersecurity incidents such as computer break-ins, phishing, identity theft and other disruptions could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure and may cause existing and potential customers to refrain from doing business with us.

In addition, contingency plans in place may not be sufficient to cover liabilities associated with any such events and, therefore, applicable insurance coverage may be deemed inadequate, preventing us from receiving full compensation for the losses sustained as a result of such a disruption.

Although we intend to continue to implement security technology devices and establish operational procedures to prevent such damage, we cannot assure you that all of our systems are entirely free from vulnerability and these security measures will be successful. If any of these events occur, it could damage our reputation, entail serious costs and affect our transactions, as well as our business, results of operations and financial condition.

Because we are a financial institution, any insolvency proceeding against us would be subject to the powers of, and intervention by, the Central Bank, which may limit remedies otherwise available and extend the duration of the proceedings.

Under Argentine law, the liquidation and commencement of bankruptcy proceedings against financial institutions, until their banking license has been revoked by the Central Bank, may only be commenced by the Central Bank. If BBVA Francés were unable to pay its debts as they come due, the Central Bank could intervene and revoke its banking license, and file a bankruptcy petition before a commercial court. If the Central Bank intervenes, the reorganization proceeding could take longer and it is likely that the shareholders’ remedies would be restricted. During any such process, the Central Bank would have to consider its interests as a regulator and could well prioritize the claims of other creditors and third parties against us. As a result of any such intervention, shareholders may realize substantially less on the claims than they would in a bankruptcy proceeding of a non-financial institution in Argentina or a financial institution or non-financial institution in the United States or any other country.

Lawsuits brought against us outside Argentina, the enforcement of foreign judgments and complaints based on foreign legal concepts may be unsuccessful.

We are a commercial bank organized under the laws of Argentina. Most of our shareholders, directors, members of the supervisory committee and officers and certain experts named herein reside outside the United States (principally in Argentina). Substantially all of our assets are located outside the United States. If any shareholder were to bring a lawsuit against our directors, officers or experts in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons or to enforce in Argentina a judgment against them obtained in the courts of the United States based upon the civil liability provisions of the United States federal securities laws, due to specific requirements of Argentine law regarding procedural law issues and principles of public policy.

BecauseClass actions against financial institutions for an indeterminate amount may adversely affect the profitability of the financial sector and of the Bank.

The Argentine national constitution and the Argentine Consumer Protection Law No. 24,240, as supplemented or amended (the “Consumer Protection Law”), contain certain provisions regarding class actions. However, their guidance with respect to procedural rules for instituting and trying class action cases is limited. Nonetheless, Argentine courts have admitted class actions in certain cases, including various lawsuits against financial institutions related to “collective interests” such as alleged overcharging on products, interest rates and advice in the sale of public securities. Recently, some of these lawsuits have been settled by the parties out of court. These settlements have typically involved an undertaking by the financial institution to adjust their fees and charges. If class action plaintiffs were to prevail against financial institutions generally, or against us specifically, this could have an adverse effect on the financial industry generally and on our business, results of operations and financial condition in particular.

In the future, court and administrative decisions may increase the degree of protection afforded to our debtors and other customers, or be favorable to the claims brought by consumer groups or associations. This could affect the ability of financial institutions, including us, to freely determine charges, fees or expenses for their services and products, thereby affecting our business and results of operations.

BBVA, our controlling shareholder, has the ability to direct our business and its interests could conflict with yours.

As of December 31, 2016, our parent company, BBVA, directly or beneficially owned approximately 76% of our capital stock. As a result, BBVA controls virtually all decisions with respect to our company made by shareholders. It may, for example, without the concurrence of the remaining shareholders, elect a majority of our directors, effect or prevent a merger, sale of assets or other business acquisition or disposition, cause us to issue additional equity securities and determine the timing and amounts of dividends, if any, always subject to the applicable legal framework. Its interests may conflict with your interests as a holder of our shares or ADSs, and it may take actions that might be desirable to BBVA but not to our other shareholders.

Legal, Regulatory and Compliance Risks

We operate in a highly regulated environment, and our operations are subject to regulations adopted, and measures taken, by several regulatory agencies.

Financial institutions in Argentina are subject to significant regulation relating to functions that historically have been determined by the Central Bank and other regulatory authorities. The Central Bank may penalize us, in case of any breach of applicable regulations. Similarly, the CNV, which authorizes securities offerings and regulates the public securities markets in Argentina, has the authority to impose sanctions on us and our Board of Directors and controllers committee for breaches of corporate governance. In addition, pursuant to Law No. 26,831, the CNV may appoint supervisors with veto powers over resolutions of our board of directors and may temporarily remove our board of directors when as determined by the CNV, minority shareholders’ or bondholders’ interests or rights have been infringed upon. The Financial Information Unit (Unidad de Información Financiera, or “UIF”) regulates matters relating to anti-money laundering and has the ability to monitor compliance with any such regulations by financial institutions and, eventually, impose sanctions. Any such regulatory agencies could initiate proceedings and impose sanctions against us, our shareholders or directors.

The Central Bank has also imposed restrictions on the positive foreign currency net global position of financial institutions, which have been modified several times, to prevent the Central Bank’s foreign currency reserves from further decreasing. As of the date of this annual report, the positive foreign currency net global position may not exceed 25% of the lesser of the financial institution’s total capital computed for the relevant preceding month or the financial institution’s own liquid assets.

In addition, pursuant to Communication “A” 5785, sanctions imposed by the Central Bank, the UIF, the CNV and/or theSuperintendencia de Entidades Financieras y Cambiarias (the Superintendence of Financial Institutions and Exchanges, referred to as the “Superintendence”) and/or their authorities, may result in the revocation of their licenses to operate as financial institutions. Such revocation may occur when, in the opinion of the board of directors of the Central Bank, there was a material change in the conditions deemed necessary to maintain such license, including those relating to the suitability, experience, moral character or integrity of (i) the members of a financial institution’s board of directors (directors, counselors or equivalent authorities), (ii) its shareholders, (iii) the members of its supervisory committee or (iv) others, such as its managers.

The absence of a stable regulatory framework or the imposition of measures that may affect the profitability of financial institutions in Argentina and limit the capacity to hedge against currency fluctuations could result in significant limits to financial institutions’ decision-making ability. In turn, this could cause uncertainty and negatively affect our future financial activities and result of operations. In addition, existing or future legislation and regulation could require material expenditures or otherwise have a material adverse effect on our business, results of operations and financial conditions.

In addition to regulations specific to our industry, we are subject to a wide range of federal, provincial and municipal regulations and supervision generally applicable to businesses operating in Argentina, including laws and regulations pertaining to labor, social security, public health, consumer protection, the environment, competition and price controls.

These or any other future governmental measures or regulations may adversely affect our business, results of operations and financial institution, any insolvency proceeding against us would be subjectcondition.

The instability of the regulatory framework, in particular the regulatory framework affecting financial institutions, could have a material adverse effect on financial institutions such as the BBVA Francés.

During Cristina Kirchner’s second term as President a series of new regulations were issued affecting financial institutions, mainly regulating the foreign exchange market and imposing new capital requirements for financial institutions. In this regard, Communications “A” 5272 and 5273 of the Central Bank, dated February 1, 2012, increased the capital requirements for financial institutions carrying out activities in Argentina. These Communications required certain minimum capital levels in order to support operational risks and the distribution of dividends, and an additional capital buffer equivalent to 75% of the total capital requirements. The Central Bank stated that these new requirements were based on the credit risk measure required by Basel II. For more information regarding capital requirements for Argentine banks please see “Item 4. Information on the Company—F. The Argentine Banking System and its Regulatory Framework”. Moreover, a new law was approved by the Congress introducing amendments to the Central Bank’s charter. The principal issues addressed by this bill were the use of Central Bank’s reserves for the cancellation of public debt together with the implementation of polices by the Central Bank in order to interfere in the determination of interest rates and terms of loans to financial institutions.

The Central Bank issued Communications “A” 5319 and “A” 5380, dated July 5, 2012 and December 21, 2012, respectively, and Communication “A” 5516, dated December 27, 2013, making it mandatory for banks to provide credit lines for productive purposes. The government’s intention was to increase investments, although an increase in the demand for these loans could in turn lower the demand for other types of loans. The Bank granted approximately Ps.18,875 million in 2016 for these types of loans.

On November 29, 2012, the Argentine Congress passed the new “Securities Law”, which modified the public offer regime set forth by Law No. 17,811, as amended. One of the most significant amendments introduced by the Securities Law referred to the powers of the CNV. The adoption of Section 20 of the Securities Law raised concern in the market, especially among listed companies, since it entitles the CNV to (i) appoint supervisors with veto power over the resolutions adopted by the board of directors of listed companies and intervention(ii) disqualify the board of directors of listed companies for a period of 180 days when, as determined by the CNV, the interests of the minority shareholders and/or security holders are adversely affected.

On October 1, 2013, the Central Bank issued Communication “A” 5460, granting broad protections to consumers of financial services, including, among other aspects, the regulation of fees and commissions charged by financial institutions for their services. As a result, fees and charges must represent a real, direct and demonstrable cost and should have technical and economic justification. Communication “A” 5514 introduced an exception to the application of Communication “A” 5460 for certain credit agreements that have pledges as collateral and are entered into before September 30, 2019.

On December 23, 2014, the Central Bank amended Communication “A” 5460 through Communication “A” 5685. As a result of this amendment, any increase in commissions for new products or services for retail customers must have the prior authorization of the Central Bank.

Additionally, according to Central Bank Communication “A” 5689, dated January 8, 2015, financial institutions must deduct from the potential dividend distributable amount any fine imposed by the Central Bank, which may limit remedies otherwise availablethe CNV and extend the durationUIF.

While the Macri Administration has repealed part of the proceedings.regulatory framework enacted by the Fernández de Kirchner Administration, such as (i) the restrictions on the foreign exchange market, (ii) the regulations concerning minimum and maximum interest rates on certain loans and deposits, (iii) the requirements governing the flow of capital into Argentina, (iv) the percentage of foreign currency positions of financial institutions, (v) the monthly contributions that banks must set aside each month to fund the deposit guarantee fund, (vi) additional capital requirements for the dividend distribution, and (vii) the requirement of prior authorizations to increase commissions, it is still early to know whether the new regulatory framework will be stable and the impact that the new regulatory framework may have on our business. The absence of a stable regulatory framework or the introduction of new regulations that affect the banking business could limit the ability of financial institutions, including BBVA Francés, to make long-term decisions, such as asset-allocation decisions, and could cause uncertainty with respect to our future business, results of operations and financial condition. We cannot assure that laws and regulations currently governing the financial sector will not continue to change in the future or that any changes will not adversely affect our business, results of operations and financial condition.

Exposure to multiple provincial and municipal legislation and regulations could adversely affect our business and results of operations.

UnderArgentina has a federal system of government with 23 provinces and one autonomous city (Buenos Aires), each of which, under the Argentine law,national constitution, has full power to enact legislation concerning taxes and other matters. Likewise, within each province, municipal governments have broad powers to regulate such matters. Due to the liquidationfact that our branches are located in multiple provinces, we are also subject to multiple provincial and commencementmunicipal legislation and regulations. Future developments in provincial and municipal legislation concerning taxes, provincial regulations or other matters may adversely affect our business, results of bankruptcy proceedings againstoperations or financial institutions, until their banking licensecondition.

The Consumer Protection Law and the Credit Card Law may limit some of the rights afforded to us and our subsidiaries.

The Consumer Protection Law establishes a number of rules and principles for the protection of consumers. Although the Consumer Protection Law does not contain specific provisions for its enforcement in relation to financial activities, it does contain general provisions that might be used as grounds to uphold such enforcement, as it has been revokedpreviously interpreted in various legal precedents. Moreover, the new Argentine Civil and Commercial Code has captured the principles of the Consumer Protection Law and established their application to banking agreements.

The application of both the Consumer Protection Law and the Credit Card Law No. 25,065 (the “Credit Card Law”) by administrative authorities and courts at the federal, provincial and municipal levels has increased. Moreover, administrative and judicial authorities have issued various rules and regulations aimed at strengthening consumer protection. In this context, the Central Bank issued Communication “A” 5460, as supplemented and amended, granting broad protection to financial services customers, limiting fees and charges that financial institutions may onlyvalidly collect from their clients. In addition, the Argentine Supreme Court of Justice issued the Acordada 32/2014, creating the Public Registry of Collective Proceedings for the purpose of registering collective proceedings (such as class actions) filed with national and federal courts. In the event that we are found to be commencedliable for violations of any of the provisions of the Consumer Protection Law or the Credit Card Law, the potential penalties could limit some of our rights, such as reducing our ability to collect payments due from services and financing provided us, or otherwise adversely affect our business, results of operations and financial condition.

 On September 18, 2014, a new pre-judicial service of dispute resolution was created by Law No. 26,993, in order for consumers and providers to resolve any dispute within the course of 30 days, including fines for companies that do not attend the hearings.

Furthermore, the rules that govern the credit card business provide for variable caps on the interest rates that financial institutions may charge clients and the fees that they may charge merchants. Moreover, general legal provisions exist pursuant to which courts could decrease the interest rates and fees agreed upon by the Central Bank. If BBVA Francés were unableparties on the grounds that they are excessively high. A change in applicable law or the existence of court decisions that lower the cap on interest rates and fees that clients and merchants may be charged would reduce our revenues and therefore negatively affect our results of operations.

The application of this regulation or any new regulation that may limit some of the rights afforded to pay its debts asus could have a material adverse effect on our business, results of operations and financial condition.

We are exposed to risks in relation to compliance with anti-corruption laws and regulations and economic sanctions programs.

Our operations are subject to various anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, and economic sanction programs, including those administered by the United Nations and the United States, including the U.S. Treasury Department’s Office of Foreign Assets Control. The anti-corruption laws generally prohibit providing anything of value to government officials for the purposes of obtaining or retaining business or securing any improper business advantage. As part of our business, we may deal with entities the employees of which are considered government officials. In addition, economic sanctions programs restrict our business dealings with certain sanctioned countries, individuals and entities.

Although we have internal policies and procedures designed to ensure compliance with applicable anti-corruption laws and sanctions regulations, there can be no assurance that such policies and procedures will be sufficient or that our employees, directors, officers, partners, agents and service providers will not take actions in violation of our policies and procedures (or otherwise in violation of the relevant anti-corruption laws and sanctions regulations) for which we or they come due,may be ultimately held responsible. Violations of anti-corruption laws and sanctions regulations could lead to financial penalties being imposed on us, limits being placed on our activities, our authorizations and licenses being revoked, damage to our reputation and other consequences that could have a material adverse effect on our business, results of operations and financial condition. Further, litigations or investigations relating to alleged or suspected violations of anti-corruption laws and sanctions regulations could be costly.

Our anti-money laundering and anti-terrorism policies may be circumvented or otherwise not be sufficient to prevent all money laundering or terrorism financing.

We are subject to rules and regulations regarding money laundering and the Central Bankfinancing of terrorism. Monitoring compliance with anti-money laundering and anti-terrorism financing rules can put a significant financial burden on banks and other financial institutions and pose significant technical problems. Although we believe that our current policies and procedures are sufficient to comply with applicable rules and regulations, we cannot guarantee that our anti-money laundering and anti-terrorism financing policies and procedures will not be circumvented or otherwise not be sufficient to prevent all money laundering or terrorism financing. Any of such events may have severe consequences, including sanctions, fines and notably reputational consequences, which could intervenehave a material adverse effect on our business, results of operations and revoke its banking license,financial condition.

Argentine corporate disclosure, governance and file a bankruptcy petition before a commercial court. If the Central Bank intervenes, the reorganization proceeding could take longer and it is likely that the shareholders’ remediesaccounting standards may require us to provide different information than would be restricted. During any such process, the Central Bank would haverequired under U.S. standards. This difference could influence foreign investors’ decisions to consider its interests as a regulatorinvest in Argentine securities and could well prioritizetherefore limit our access to international markets.

The securities laws of Argentina that govern publicly-listed companies such as us impose disclosure requirements that are more limited than those in the claims of other creditorsUnited States. The Argentine securities markets are not as highly regulated and third parties againstsupervised as the Bank.U.S. securities markets. There are also important differences between accounting and financial reporting standards applicable to financial institutions in Argentina and those in the United States. As a result, financial statements and reported earnings of any such intervention, shareholders may realize substantially lessArgentine financial institutions generally differ from those reported based on U.S. accounting and reporting standards. See “Item 5. Operating and Financial Review and Prospects—U.S. and Argentine Banking GAAP Reconciliation” for a description of the claims thanprincipal differences between Argentine banking GAAP and U.S. GAAP and how they would inaffect our financial statements and the reconciliation to U.S. GAAP of net income and total stockholders’ equity for the periods ended and as of the dates therein indicated.

Accordingly, the information available about us will not be the same as the information available about a bankruptcy proceeding of a non-financial institution in Argentina or a financial institution or non-financial institutionU.S. company. The difference in the United States or any other country.disclosure requirements between Argentine corporate governance and accounting standards and U.S. GAAP could limit foreign investors’ ability to evaluate our business, results of operations and financial condition, and influence foreign investors’ decisions whether to invest in Argentine securities, thereby limiting our access to international financial markets.

The special rules that govern the priority of different stakeholders of financial institutions in Argentina, which give priority to depositors with respect to most other creditors, may negatively affect other stakeholders in case of judicial liquidation or bankruptcy of the Bank.

Argentine Law No. 24,485, in force since April 18, 1995 and as amended by Law No. 25,089, provides that in case of judicial liquidation or bankruptcy of a financial institution such as the Bank,BBVA Francés, all depositors, irrespective of the type, amount or currency of their deposits, will have general and absolute preferential rights with respect to all other creditors, except for certain labor credits and credits secured with a pledge or mortgage, to be paid with 100% of the funds deriving from the liquidation of the Bank’sour assets. In addition, depositors of any kind of deposits have special preferential rights over the remaining creditors of the Bank,us, except for certain labor credits, to be paid with (i) any of the Bank’sour funds which may be held by the Central Bank as total reserves, (ii) any remaining funds of the Bankours in existence as of the date on which the Bank’sour license is revoked, or (iii) any funds derived from the compulsory transfer of certain assets of the Bankour assets according to instructions of the Central Bank, in the following order of priority: (a) deposits made by legal entities up to Ps.5,000 per entity, or its equivalent in foreign currency, (b) deposits for terms exceeding 90 days and (c) all other deposits on a pro rata basis.

In case of a judicial liquidation or bankruptcy of a financial institution such as the Bank,BBVA Francés, shareholders may not be able to partially or completely recover their investment due to the priority imposed by law.

Volatility of credit ratings in Argentina could affect the volatility of the Bank’s credit ratings, and therefore limit the Bank’s access to international financial markets.

The Bank’s credit ratings are based on Argentina's sovereign rating, which has fluctuated considerably since the Argentine Crisis. As a result, the Bank’s ratings have also fluctuated in this period, although they have tended to be higher than the sovereign

rating. These fluctuations impact our costs of funding, our collateral obligations and our ability to access international markets. Although Argentina is not longer in default following the final agreement with Holdouts, continued volatility of, or a decrease in, Argentina’s sovereign rating could limit our access to financing or make such financing more expensive for us, even if available, which could in turn adversely affect our business, results of operations and financial condition.

Factors Related to BBVA Francés’ Subsidiaries

As a consequence of the social security reform and the consequent loss of corporate purpose and liquidation of our subsidiary Consolidar AFJP S.A., labor lawsuits were filed against it claiming certainpayments. Adverse rulings against Consolidar AFJP in such lawsuits could result in severance payment obligations in significant amounts, which could have a material adverse effect on the financial condition of Consolidar AFJP.

Consolidar AFJP S.A. (“Consolidar AFJP” or “AFJP”) was a privately-owned pension fund managing company whose purpose was the administration of retirement contributions from affiliates and the corresponding payment of senior, disability and widow’s pensions. On December 4, 2008, the Federal government enacted Law No. 26,425 to implement a social security reform, by which the government assumed any liabilities of the pension fund arising from retirement, disability and death.

On December 7, 2010, Consolidar AFJP filed a claim against the Federal government and the Ministry of Labor and Social Security, requesting compensation for the losses suffered by the company and its shareholders, as a result of the aforementioned social security reform.

Moreover, as a consequence of the social security reform and the consequent loss of its corporate business purpose, at an extraordinary shareholder meeting held on December 28, 2009, the AFJP shareholders, decided to terminate the corporate existence of the company and liquidate it. As of the present date, the liquidation process is still ongoing.

During 2015, 10 labor legal actions were filed against AFJP claiming differences in severance payment amounts. The differences in amounts are immaterial and include wage differences, overtime payments, and payment of additional commissions. AFJP has estimated this contingency and recorded the corresponding allowances it believes are appropriate. Adverse rulings against Consolidar AFJP could result in severance payments by the company in significant amounts, which could have a material adverse effect on the financial condition of the company. If AFJP were to have insufficient funds to cancel all of its debt obligations and consummate the liquidation process, AFJP’s creditors could have in certain circumstances recourse to BBVA Francés, as BBVA Francés holds a 53.89% equity interest in AFJP.

ITEM 4. INFORMATION ON THE COMPANY

RECENT POLITICAL AND ECONOMIC DEVELOPMENTS IN ARGENTINARecent Political and Economic Developments in Argentina

Macroeconomic EnvironmentMacri Administration

Presidential and legislativecongressional elections in October 2015. Daniel Scioli, candidate of the governing party, Frente para la Victoria (“FPV”), received 36.8% of the votes, followed by Mauricio Macri, of the opposition coalition Cambiemos, with 34.3%. Argentina’s election system establishes that a candidate must win more than 50% of the vote or obtain least a 10% advantage over his immediate follower in order to be declared as winner in the first round of voting. Given these results, a runoff electionArgentina took place in October and November between.2015, resulting in Mr. Scioli and Mr.Mauricio Macri which Mr. Macri won with 51.4%being elected President of the votes. On December 10, 2015 Cambiemos took over after 12 years of FPV government.

Argentina. The Macri Administration assumed office on December 10, 2015. Since assuming office, the Macri Administration has recognized the previous government’s interference with the INDECannounced and the unreliabilityexecuted several significant economic and policy reforms and transactions, including:

§Foreign exchange reforms. The Macri Administration eliminated substantially all of the data it published.foreign exchange restrictions, including certain currency controls that were imposed by the Fernández de Kirchner administration. These reforms are expected to provide greater flexibility and easier access to the foreign exchange market. See“Item 10. Additional Information. D. Exchange Controls” for a description of the principal measures adopted as of the date of this annual report.

§INDEC reforms. On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP, poverty and foreign trade data, the Macri Administration issued Decree No. 55/2016, declaring thedeclared a state of administrative emergency related tofor the national statistical system and the INDEC until December 31, 2016. INDEC thus ceased publishing statistical information until its technical and administrative structure is reorganized. DuringAs of the date of this reorganization period, which is expected to last between six and eight months,annual report, the INDEC ishas published certain revised data, including the CPI for May, June, July, August, September, October, November and December 2016 and foreign trade and balance of payment statistics. On June 29, 2016, the INDEC published the INDEC report including revised GDP data for the years 2004 through 2015. On September 22, 2016, the INDEC resumed publication of its essential goods and services basket assessment. On November 9, 2016, the IMF Executive Board lifted its censure on the Republic, noting that the Republic had resumed the publication of data in a manner consistent with its obligations under the Articles of Agreement of the IMF. However, the administrative emergency continues.

§Access to public information act. On September 14, 2016, Congress passed Law No. 27,275, which establishes the right to access certain information of, among others, the government, the attorney general’s office, the judiciary council, congress, the Central Bank, entities owned by the Argentine state, institutions or funds administered by the government and business organizations or trusts that have received public funds.

§Financial policy. Soon after taking office, the Macri Administration sought to settle the outstanding claims with the holders of untendered government debt (holdouts), and the Minister of the Treasury designed a debt restructuring and cancellation program with the aim of reducing the amount of outstanding untendered government debt. In February 2016, the Republic entered into agreements in principle to settle outstanding claims with certain holdouts and put forward a proposal to other holdouts, including those with pending claims in U.S. courts, subject to certain conditions. On March 31, 2016, the Argentine Congress repealed the legislative obstacles to the settlement and approved the settlement proposal. Since April 2016, Argentina has continued settling claims with holdouts consistent with the terms of its February 2016 settlement proposal. As of December 31, 2016, the outstanding principal amount of untendered government debt that was not subject to a settlement agreement totaled approximately US$1.51 billion.

§Foreign currency-denominated bonds. Since April 2016 Argentina has issued foreign currency denominated bonds in aggregate amounts of US$2.75 billion and €2.5 billion under foreign law and reopened securities issued under local law for a total of US$1.2 billion. In addition, Argentina accessed the domestic U.S. dollar market by issuing Treasury bonds, of which US$7.6 billion were outstanding as of December 31, 2016.

§Foreign trade reforms. The Kirchner and Fernández de Kirchner administrations imposed export duties and other restrictions on several sectors, particularly the agricultural sector. The Macri Administration eliminated export duties on wheat, corn, beef, mining, oil and regional products, and reduced the duty on soybean exports by 5%, from 35% to 30%. A 5% export duty on most industrial exports was also eliminated. With respect to payments for imports of goods and services to be performed abroad, the Macri Administration eliminated the restrictions on access to the foreign exchange market. In addition, importers were offered short-term debt securities issued by the Republic to be used to repay outstanding commercial debt for the import of goods.

§Fiscal policy. The Macri Administration took steps to anchor the fiscal accounts and to reduce the primary fiscal deficit, and pursued a primary fiscal deficit target of 4.8% of GDP in 2016 through the elimination of subsidies, the reorganization of certain expenditures and the generation of increased revenue through the Tax Amnesty Regime (as defined below).

§Correction of monetary imbalances. The Macri Administration announced the adoption of an inflation targeting regime in parallel with the floating exchange rate regime and set inflation targets for the next three years. The Central Bank has increased efforts to reduce excess monetary imbalances and raised peso interest rates to offset inflationary pressure. Inflation from May to December 2016, as measured by INDEC, was 16.9%. In October 2016, the Central Bank announced its intention to use the official CPI figures and other statistics published by7-day repo reference rate as the Provinceanchor of San Luis andits inflation targeting regime beginning in January 2017. The short-term Central Bank notes rate (LEBAC 35-day term), which had initially been used as the City of Buenos Aires..monetary policy rate, would therefore only be used to manage the system liquidity.

INDEC published revised GDP figures for 2015

§ National electricity state of emergency and reforms. Following years of very limited investment in the energy sector, as well as the continued freeze on March 30, 2016. Accordingelectricity and natural gas tariffs since the Argentine Crisis, Argentina began to this, Argentine GDP at constant prices grew 2.1%experience energy shortages in 20152011. In response to the growing energy crisis, the Macri Administration declared a state of emergency with respect to 2014.the national electricity system, which is scheduled to remain in effect until December 31, 2017. The state of emergency allows the government to take actions designed to ensure the supply of electricity to the country. In addition, the Macri Administration announced the elimination of a portion of energy subsidies and a substantial increase in electricity rates. As a result, average electricity prices have already increased and could increase further. By correcting tariffs, modifying the regulatory framework and reducing the government’s role as an active market participant, the Macri Administration sought to correct distortions in the energy sector and stimulate investment. However, certain of the government’s initiatives were challenged in the Argentine courts and resulted in judicial injunctions or rulings limiting the government’s initiatives. As of the date hereof the determination of the final tariffs and reference prices is pending.

§Tariff increases. With the aim of encouraging companies to invest and improve the services they offer and enabling the government to assist those in needs, the Macri Administration has begun updating the tariffs for electricity, transportation, gas and water services. Each of the announced tariff increases contemplates a social tariff, which is designed to provide support to vulnerable groups, including beneficiaries of social programs, retirees and pensioners that receive up to two minimum pensions, workers that receive up to two minimum salaries, individuals with disabilities, domestic workers and individuals receiving unemployment insurance, among others. Subsequent modifications to these announced tariff increases were made thereafter. Certain of these tariff increases are being challenged in court.

§Tax Amnesty Regime. In July 2016, the Régimen de Sinceramiento Fiscal was introduced to promote the voluntary declaration of assets by Argentine residents (the “Tax Amnesty Regime”). The law allows Argentine tax residents holding undeclared funds or assets located in Argentina or abroad to (i) declare such property until March 31, 2017 without facing prosecution for tax evasion or being required to pay outstanding tax liabilities on the assets, provided they can provide evidence that the assets were held by certain specified cut-off dates, and (ii) keep the declared property outside Argentina and not repatriate such property to Argentina. In the case of cash that was not deposited in bank accounts by the specified cut-off dates, such amounts have to be disclosed by October 31, 2016 and deposited by November 21, 2016 in special accounts opened at Argentine financial institutions. As of December 31, 2016, assets totaling approximately, Ps.106.8 billion had been declared. Depending on the amount declared, how soon it is declared, the election to subscribe for certain investment securities and the payment method used, those who take advantage of the law will pay a special tax of between 0 and 15% on the total amount declared. Alternatively, they can invest an equivalent amount in government bonds or a fund that will finance, among other things, public infrastructure projects and small to medium-sized businesses in general.

Recent Macroeconomic Environment

According the figures issued by the INDEC, economic activity, measured in terms of GDP, declined by 2.3% during 2016 compared with 2015.

With respect to the labor market, the latest official data published information is for the third quarter of 2015, and2016, which reflected a decrease in the unemployment rate to 5.9%8.5% from 7.5%9.3% in the thirdsecond quarter of 2014. Salaries,2016 (source: INDEC). These are the first figures published after the statistical emergency was declared, and the historical series has not been modified.

Since June 2016, the INDEC has resumed the publication of the CPI-GBA, with April of 2016 as the reference period. The GBA covers the autonomous city of Buenos Aires and the 24 districts of the Greater Buenos Aires area, representing 44.7% of the urban household expenditures according to the household expenditures survey, the source for determining the new weighting values of the index. The INDEC is working on designing the next household expenditures survey, which is scheduled to be launched in 2017.

At year-end 2016, the CPI-GBA accumulated a 16.9% increase since April 2016 (the date in which it was released), the average monthly variation being 2.09%. In 2016, significant adjustments were made in the charges for transport, water, gas and electricity which had an impact on prices, but the effect is not fully captured by the CPI-GBA due to the lack of historical data.

Therefore, in order to better understand the evolution of prices in 2016, the CPI of the City of Buenos Aires (the “CPI-CABA”) was used. The CPI-CABA accumulated a 41.0% variation during the year, with an average Salary index including bothmonthly inflation of 4.4% in the first half of the year and of 1.5% in the second half (source: Government of the City of Buenos Aires).

By sectors, the division comprising household, water, electricity and other fuels stood out with a 71.2% increase, which is one of the main reasons for the annual inflation of 21.5% at year end.

privateDue to the new publication of the CPI-GBA by the INDEC, as from and public sector wages compiled by INDEC, rose 30.1% between October 2014including June 26, 2016 the calculation of the Reference Stabilization Index (CER) is made on the basis of the median geometric rate of variation of the CPI-GBA, as per Resolution 203/2016 of the Ministry of the Treasury and October 2015. Salaries for workers in the private sector (excluding the underground economy) and for public employees increased 28.1% and 32.8%, respectively, during that period.Public Finance.

Since January 2014 the INDEC publishesThe national public sector registered a new price index, the so-called National and Urban Consumer Price Index (IPC-NU), which has tended to measure price variations below those recorded by other provincial and private indices For the first ten monthsprimary deficit of 2015 inflation measured by the IPC-NU was 11.9%, and annual inflation was 14.3% by that measure. By contrast, the IPCBA (a price index compiled by the Statistical Office of the Government of the Autonomous City of Buenos Aires) recorded an accumulated inflation of 19.8% (23.8% year-to-year) for the same period. Publication of the IPC-NU has also been suspended since October 2015. Using the IPCBA figures, as suggested by the new INDEC officials, to calculate the CER coefficient, which is used to adjust inflation-indexed instruments, inflation reached 26.9% between December 2014 and December 2015.

During 2015, an expansive fiscal policy remained in place. The primary fiscal deficit was Ps.104.797 billion, compared to Ps.38.562Ps.359.4 billion in 2014,2016, which represents an increase of 171.8%52.9% compared with the deficit of Ps.235.1 billion for the preceding year (source: Ministry of Economy). This resultedThese figures do not include the income from rents of the fact that primary spending rose by 34.5%, while total revenues rose by a 29.3% rate year-to-year duringCentral Bank and the same period.Social Security Administration (the “ANSES”).

With respect to specific expense items, social security benefitsPrimary public spending increased by 47.4% year over year, followed38.2% in 2016 while the public sector income increased by 35.3%. The public debt interest payments increased by 53.3%. Taking into account the rental income of the BCRA and the ANSES, the total deficit amounted to Ps.365.2 billion at December 31, 2016, representing a 39%61.8% increase compared with 2015 (source: Ministry of Economy).

On the expenditure side, the 56.9% year-on-year increase in wage expenses and a 50.6% increase in transfers to the provinces. All these items grew well above the primary spending average rate for the year. By contrast,current transfers to the private sector (+31.5%) and capital expenses (+22.5%) grew at below-average rates.

the 37.2% increase in social security outlays stand out. Capital expenditure increased by 13.2% in 2016 compared with 2015. On the other hand, income side, during 2015was sustained by social security revenue (+39.4%) wascontributions, which increased by 33.1% in 2016 compared with 2015, while the main contributortax collection increase amounted to overall revenue growth. Tax revenue grew at a slower rate (25.8% during the period)37.8%, mainly because of a decrease inthanks to the collection of export duties. After interest,tax amnesty-related penalties at the national government recorded a deficitend of Ps.225.637 billion, 105.6% higher than the 2014 deficit.2016 (source: Ministry of Economy).

TotalIn 2016, tax revenue increased by 31.5% year on year in 2015 with income tax revenue increasing by 42.8%34.6%. Revenue derived from export duties decreased 9.7% because of lower agricultural commodity prices.VAT revenue was up by 30.8%, while revenue from Social Securityincome taxes increased by 34.8% year-to-year13.5% and the VAT collected was 34.7% higher than in 2015. Export duties decreased by 5.8% due to a reduction of the applicable rates. There was also an extraordinary, one-off tax windfall in the last two months of 2016 resulting from fines applied in connection with a fiscal amnesty. Fines on the newly reported funds amounted Ps.82.0 billion. Without considering these contributions, tax collections would have increased by 29.3% in 2016 compared with 2015 (source: Ministry of Economy).

There was a strongThe foreign trade contractionbalance went from a US$3.0 billion deficit in 2015. The trade balance fell2015 to a deficit of US$3,038 million compared to a US$3,107 million2.2 billion surplus in 2014. On2016. This was mainly due to the exports side, this decline wasdecrease in imports during the resultyear, which totaled US$55.6 billion, representing a 6.9% decrease compared with 2015, mainly due to the 30.7% decrease in the price of stagnant volumesfuels and lubricants and the 14.4% decrease in the price of intermediate goods. Exports totaled US$57.7 billion, 1.7% higher than in the previous year, with a significant slump17.7% increase in prices, especially for agricultural commodities. The valuesales of exportsprimary products, partially offsetting a fall of 11.5% in 2015 reached US$56,751 million, a contractionsales of 16.9% compared to 2014, while total imports fell by 8.3% to US$59,789 million.fuels and energy (source: INDEC).

On December 17, 2015 the new government announced the elimination of all restrictions imposed on the access of agents toIn the foreign exchange market, the so-called “Cepo” (“Foreign-Exchange Clamp”), which had been implemented in October 2011. The Peso was subject to an average devaluation of around 1.1% per month between January and November 2015. In December, in line with the elimination of those restrictions and the normalization of the exchange rate market, the Argentine Peso experiencedpeso underwent a devaluation of 34% The official21.9% during the year to reach an exchange rate reached 13.005 Ps./of Ps.15.85 per US$ at the endclose of 2016. The average exchange rate increased by 38.5% during 2016, taking into account the month, an accumulated 52.6% increase indevaluation of December 2015 resulting from the price of the dollar in pesos for the year, with an average rate in December of 11.45 Ps./US$, 33.9% higher than the average of 8.55 Ps./US$ in December 2014.

During the enforcement of the “Foreign-Exchange Clamp” in 2015, US$6,720 million dollars were sold to the public for “portfolio dollarization” purposes, out of total net sales of US$7,531 million by the BCRA during the whole year. On the income side, the main items were export settlements for US$23,834 million plus US$11,000 million from a swap transaction with the Popular Bank of China. Of these, an equivalent of US$3.0 billion yuans were converted into dollars after the liftingliberalization of the foreign exchange restrictionsmarket (source: Central Bank).

International reserves at December 31, 2016 amounted to US$38.8 billion, representing an increase liquid reserves. Atof US$13.2 billion compared with international reserves at December 31, 2015 there were international reserves of US$25,563 million, a decrease of US$5,879 million with respect to the end of 2014.(source: Central Bank).

Monetary Policy

Monetary policy was strongly expansiveBeginning in 2015.January 2017, the BCRA has implemented a formal scheme of inflation targeting, which foresees annually decreasing objectives until 2019 and uses the 7-day repo reference rate as the anchor of its inflation targeting regime. The year recorded an increase of Ps.161.365 billion inCentral Bank determines a “rates corridor”, defined by the spread between active and passive repo rates, from which the monetary base, a 40.5% increase over the previous year (almost double the 22.5%policy rate recorded in 2014).is derived. The main source of expansioninflation objective range for 2016 was the financing of the public sector, amounting to Ps.177.926 billion (a 10.2% increase over the Ps.161.508 billion of 2014), followed by monetary expansion which originated in the cancellation of foreign exchange futures contracts (some Ps.30 billion) signed by thebetween 20%-25% and for 2017 is between 12%-17% (source: Central Bank).

previous administration. This monetary expansion was partially compensated by net sales by the Central Bank in the foreign-exchange market in order to support the peso, amounting to Ps.71.822 billion or the equivalent of USD 7,530 million. The M2 monetary aggregate base known as “M2”, which includes currencycash held by the public checking accountsand current account and savings accounts,account deposits of the private and the public sector, measured in terms of balances, increased 28.0% year over yearby 30.3% in 2016 compared with a 28.2% ncrease in 2015. Considering the average balances, the growth during 2016 reached 19.2% compared with 37% in 2015 and 28.9% in 2014.(source: Central Bank).

The private banks’ Badlar interest rate (the rate paid by private banks on 30-35 day term deposits over 1 million pesos) expressed in monthly averages showed an upward trend, going from 19.98%was 26.3% in January 2016 and reached a maximum of 30.9% in May and then decreased to 20.1% in December 2014 to a year-high of 27.54% in December 2015. That figure was significantly influenced by the adjustment of interest rates on BCRA short-term bills used to absorb excess liquidity (“Lebacs”), which reached a record 38% in mid-December, 2015. The hike was implemented in order to increase the appeal of holding positions in local currency and to contain the depreciation of the Peso after the normalization of the foreign exchange market mentioned above.2016 (source: Central Bank).

Total deposits in the financial systemsector increased by 37.9%41.5% in 2015. The2016. By contributors, the public sector increased its deposits by 11% year on year, while32.8%, and the funding originated in the private sector deposits recordedgrew by 43.9% in the year, with increases of 40,7%27.5% for deposits in pesos and 116.4%157.5% for deposits in dollars (42.3%(111.4% if measured by currency of origin), stimulated by the lift of restrictions in dollars) mainly due to the effectsforeign exchange market and the effect of the December devaluation.application of the Tax Amnesty Regime (source: Central Bank).

The stock of loans in pesos granted to the non-financial private sector increased by 36.9%19.2% during 2016. These loans were mainly personal loans followed by secured loans, which increased by 37.3% and 32.7% at December 31, 2016, respectively, compared with December 31, 2015. The foreign-exchange market liberalization was a determining factor in the performance of loans granted to the private sector in U.S. dollars, which increased by 205.7% in 2016 measured in U.S. dollars, compared with the 10.9% decline experienced by this portfolio during 2015 with credit card loans playing a leading role with a 54.1% increase. An analysis of the financial system’s credit allocation by currency reveals the private agents’ perception of an impending devaluation, as loans in dollars fell by 9.8% compared to 2014.(source: Central Bank).

It is worth mentioning that after the Macri Administration took office, both the President and several members of the Board of Directors of the BCRA resigned and new officials were appointed. Also, a series of financial system regulations were modified as explained above.

A. HISTORY AND DEVELOPMENT OF THE COMPANY

BBVA Francés, (the Bank), an Argentine corporation (a “sociedadsociedad anónima”nima or “S.A.”), was duly incorporated under the name Banco Francés del Río de la Plata S.A. on October 14, 1886. The Bank has registered its office in Reconquista 199, C1003ABB, Ciudad Autónoma de Buenos Aires, Argentina; telephone number 54-11-4346-4000. The Bank’s agent in the United States for U.S. federal securities law purposes is CT Corporation System, currently with offices at 111 Eighth Avenue, New York, New York 10011.

BBVA Francés original by-laws (“Estatutos”(estatutos) were approved on November 20, 1886, by a decree recorded in the Public Registry of Commerce of Buenos Aires City on December 6, 1886, under No. 1,065 on Folio 359, Book 5, Volume “A” of National By-laws. The by-laws, including all amendments introduced to this date, were recorded in the Public Registry of Commerce (the governmental regulatory agency of corporations). The last amendment was recorded on March 8, 2011,September 18, 2014, under No. 3,930N° 17995 Book 6270 of Corporations (“(sociedades anónimas”nimas). Pursuant to its current corporate by-laws, the Bank will terminate its activities on December 31, 2080, unless this term is extended by the shareholders.

The Bank is supervised by the Central Bank of Argentina, an entity that establishes valuation and accounting criteria, the rules on liquidity and capital requirements as well as the reporting systems of Argentine financial institutions. It is also subject to inspections by the Central Bank, based on which it is assigned a “rating”. See ““Item 4. Information on the Company—F. The Argentine Banking System and its Regulatory Framework”Framework”.

Since 1886, the Bank has been recognized as a leading provider of financial services to large corporations. In the early 1980s, it broadened its customer base to include SMEssmall and medium enterprises (“SMEs”) as well as individual customers. In response to demands from the corporate market and following the structural changes brought about by the stabilization process in Argentina, since 1991, the Bank added to its traditional commercial banking products a full range of services, such as investment banking, capital market transactions and international banking.

In the 1980s and 1990s, in order to achieve a wider market penetration, it expanded its distribution network by opening branches throughout Argentina.

In December 1996, when BBVA became the principal shareholder, the Bank reaffirmed its universal banking strategy with the goal of increasing the most profitable business segment: medium- and low-income individuals and SMEs in the middle market.

To this end, in August 1997, 71.75% of Banco de Crédito Argentino, (the “Crédito acquisition”) was acquired, a retail bank focused on the middle market and consumer banking sectors. This merger allowed it to maximize the strengths of each bank and to implement an ambitious leadership plan that included an expansion plan, starting with a strong initial positioning in each market.

sectors, was acquired. To effect the merger, BBVA Francés issued 14,174,432 ordinary shares to the existing shareholders of Banco de Crédito through a capital increase. On March 5, 1998 the Public Registry of Commerce registered the merger as well as the change in the name of the company from Banco Francés del Río de la Plata S.A. to Banco Francés S.A.

At the ordinary and extraordinary shareholders’ meeting held on April 27, 2000, a resolution was passed to change our name to BBVA Francés S.A. On October 4, 2000, the Public Registry of Commerce registered our change from Banco Francés S.A. to BBVA Francés S.A., and the amendment to our by-laws were made reflects the name change.

In the early 2000’s the Argentine Crisis and the ensuing economic and political instability led to a deep contraction in the intermediation volumes. In response, the Bank changed its short-term commercial strategy towards the transactional business, adjusted its operating structure and implemented a strict cost control plan. Actions were also focused on recovering asset quality levels, which had been strongly affected by the Argentine Crisis. By mid-2003, the economy began to recover and itwe returned to offering the full range of financial services, including credit facilities, albeit restricted to short-term financing. Commencing in 2004, itBBVA Francés gradually strengthened its credit activity in the midst of economic solvency, and consolidated its transactional business. During last years, the Bank focused mainly in the most profitable segments, retail and small and medium size companies, maintaining the leadership in the large corporations business.

On February 9, 2012, the board of directors of BBVA Francés and Inversora Otar S.A. approved the merger between both companies and on March 26, 2012, the Shareholders Meetingsshareholders’ meetings of both companies approved the transaction. On July 18, 2013, the Argentine Central Bank authorized the merger by Resolution No. 473 and on August 8, 2013 the National Securities Commission (Comisión Nacional de Valores)CNV approved it by Resolution No. 17,155. On March 27, 2014, it was registered with the Superintendencesupervisory board of Corporationscompanies (the “IGJ”) under No. 5,302, Book 68 of Corporations.

On March 26, 2014, BBVA Francés cancelled 50,410,182 ordinary shares and issued simultaneously 50,410,182 ordinary shares of BBVA Francés, to be delivered in exchange to the former owners of Inversora Otar (BBV América S.L., Corporación General Financiera S.A. and Sucesión Romero) pursuant to the exchange ratio duly approved. As a result of this transaction as of December 31, 2014, the shareholders of Inversora Otar S.A. have the following ownership onof BBVA Frances:Francés: BBV América S.L. 29.81%, Corporación General Financiera S.A. 0.47% and Sucesión Romero 0.0041%.

Because of this simultaneous increase and cancellation of the shares, the total amount of the corporate capital of the Bank remained unchanged. On April 1, 2012, as a result of the merger between BBVA Francés and Inversora Otar S.A., BBVA Francés acquired all the shares of BBVA Francés Valores Sociedad de Bolsa S.A. previously held by Inversora Otar S.A., becoming its sole shareholder. On June 29, 2012, BBVA Francés S.A. sold a 3.0047% interest in BBVA Francés Valores Sociedad de Bolsa S.A. to BBV America SL for Ps.441,194.

On July 10, 2013, BBVA Francés and Consultatio S.A. signed a sale and purchase agreement, under which the Bank acquired 23 of the 33 floors of the building under construction by Consultatio S.A., which will became the “BBVA Tower”. This iswas the largest corporate headquarters real estate development project in the country and iswas part of the plan designed in 2010 by BBVA Francés to unify its core areas, currently divided among 10 buildings in the City of Buenos Aires. The goal is to have a building with the highest construction and environmental standards that will allow the Bank’s staff to work together in the same area, thus achieving greater efficiency. It is worth noting the building is beinghas been developed according to the highest international environmental and sustainability standards and with the commitment of the BBVA Group of preserving the environment. The investment of approximately Ps.1,200 million has a payment schedule associated with the work progress of the project. To date, constructionOn December 27, 2016 the Bank took possession of the floors and started the relocation process. This process is progressing according to plan and projected for completion in 2016.still ongoing.

BBVA FrancesFrancés considers the high income segment as strategic and for that reason the Bank has been working over the past twothree years on a long term plan in order to achieve a leading and differentiated position in this target. Accordingly, by the end of November 2013, the Bank launched the PREMIUM segment with an exclusive event at the Greek embassy in Argentina. This new segment is composed of the 15,000 clients with the highest income, who will have access to a new and different service experience: “Premium” executives, parking at branches with VIP spaces, free of charge subscriptions to magazines and newspapers, birthday presents and many other premium experiences at theatres, concerts and movies, with pre-sales on tickets and priority in invitations and exclusive brochures, among others.

In September 2014, BBVA Francés created the new Digital and Transformation Banking Division, following the guidelines of the BBVA Group. The new division was created in order to develop more convenient and relevant products for its customers and to pursue more dynamic business, employing increasingly innovative communication channels. Furthermore, BBVA Francés implemented some organizational changes, redefining roles and simplifying the organizational chart, in order to adapt the Bank’s internal structure to its business needs. In September 2016, with the goal of promoting and consolidating the transformation process and advancing in the fulfillment of strategic objectives, the Digital and Transformation Banking Division became part of the Business Development Department. Under this new scheme, the Business Development Department has adopted a project-based structure to take full advantage of the opportunities presented by the current context.

On May 20, 2015, BBVA Francés executedentered into a Share Purchase Agreementshare purchase agreement with the Volkswagen Group for the acquisition of 51% of the issued and outstanding capital stock and voting rights of the Volkswagen Credit Compañía Financiera S.A., representing 23,970,000 registered, non-endorsable shares of common stock, par value Ps.1. This transaction is subject to the prior approval ofOn August 25, 2016, the Central Bank issued Resolution No. 332, authorizing the acquisition of Argentina. According to the terms and conditions51% of the agreement,share capital of Volkswagen Credit Compañia Financiera S.A. by BBVA Francés. Moreover, on September 26, 2016, the maximum amountshareholders of Volkswagen Credit Compañía Financiera S.A. amended its bylaws in order to be paid forinclude the shares is Ps.53,040,000, which will be paid bynew shareholders structure and approved the Bank at the closingamendment of the transaction.company’s name to Volkswagen Financial Services Compañía Financiera S.A. The name change was registered with the IGJ on November 14, 2016, under No. 22302, Book 82 of Corporations.

In May 2015, BBVA Francés.’ss’ Board of Directors accepted the resignation of Ricardo Enrique Moreno as Executive Director (CEO), and appointed Martin Ezequiel Zarich to fill this position. The Board also decided that the resignation of Mr. Moreno shall be effective when the Central Bank of Argentina authorizes Mr. Zarich as the new Executive Director (CEO). Finally, our Board has also decided to appoint Gustavo Alonso as the new Director of Innovation & Development, replacing Mr. Zarich.

On June 30, 2015, the Board of Directors of BBVA Francés decided to carry out some changes in the Senior Management. The Board accepted the resignation of Mr. Juan Eugenio Rogero González as Risk Director and appointed Mr. Gerardo Fiandrino for this position.

On January 11, 2016 Mr. Martin Ezequiel Zarich was appointed Chief Executive OfficerDirector (CEO) after the BCRA issued the corresponding authorization through Resolution No. 9.

B. BUSINESS OVERVIEWBBVA Tower

The BBVA Tower is the image of leadership, innovation and excellence, and a clear evidence of the commitment of BBVA Francés has allto its employees as well as to the country.

This real estate development began in 2013 as part of a plan to centralize the Bank’s main areas, and is the biggest corporate tower project in the country.

The tower was built by Consultatio Real Estate and its 149m-high structure consists of 33 floors, 23 of which are owned by the Bank and will be occupied by approximately 2,000 employees of the Bank. It meets the highest sustainability standards and was awarded a LEED Gold Certification (Leadership in Energy & Environmental Design), recognizing that the building is environmentally sustainable and a healthy space to work in.

With more technology and new services which improve workplace quality in line with open space corporate layout, the tower provides spaces that allow working in areas without limits or offices dividing the employees. It promotes more fluid and transparent communication, team work and the exchange of knowledge and experiences.

In the last quarter of 2016 personnel began moving to the new headquarters, a process that is still ongoing.

Most of the Bank’s operations, property and customers are located in Argentina. The Bank has traditionally accepted deposits and granted loans in pesos and in certain other currencies, primarily in U.S. dollars. Following the Argentine Crisis, U.S. dollarforeign currency deposits were limitedcan only be lent to granting U.S. dollar-denominated loanscompanies that generate flows in relation to foreign trade transactions, which continued to be subject to Central Bank restrictions.the same currency.

As part of its business, BBVA Francés conducts capital markets and securities operations directly in the over-the-counter market and indirectly in the BCBA. At the end of December 2015,2016, the Bank had a 4.2%5.4% market share in the mutual fund portfolio management industry in Argentina through BBVA Francés Asset Management S.A. (“, according to the Argentine Chamber of Mutual Investment Funds Manager”)orCámara Argentina de Fondos Comunes de Inversión.

The Bank was one of the first companies listed on the BCBA, quoting since 1888 (ticker: FRAN). Its shares in the form of American Depositary Shares have been listed on the New York Stock Exchange since 1993 (ticker: BFR) and on the Madrid-based LATIBEX (“(Mercado de Valores Latinoamericanos”Latinoamericanos) since December 1999 (ticker: XBFR).

BBVA Francés ended its fiscal year 20152016 with Ps.110.7Ps.151.7 billion in total assets, a total of Ps.76.9Ps.114.6 billion in deposits, on a consolidated basis, and a market capitalization of Ps.48.9Ps.49.9 billion. It is the third largest private bank in terms of total deposits and the fourth in terms of total loans in the Argentine financial system accordingAccording to statistics published by the Central Bank, as of November 30, 2015.December 2016 it was the third largest private bank in Argentina in terms of deposits and the fourth one in terms of loans.

Our principal service is the provision of banking and financial services. The following table presents financial information of our principal business for the year ended December 31, 2015.2016.