Balance Sheet at 31 December 2010 of BBVA

Translation of financial statements originally issued in Spanish and prepared in accordance with generally accounting principles Spain
(See Note 1 and 54). In the event of a discrepancy, the Spanish-language version prevails.
1.5. MORTGAGE MARKET POLICIES AND PROCEDURES
The Bank has express policies and procedures in place regarding its activities in the mortgage market, which
provide for full compliance with applicable legislation pursuant to Royal Decree 716/2009, of 24 April, 2009
implementing certain aspects of Act 2/1981, of 25 March 1981, regulating the mortgage market and other
standards of the mortgage and financial system. The information required by Bank of Spain Circular 7/2010
applying Royal Decree 716/2009 is detailed in Note 20.4.4. and in Appendix VIII.
The Policies on the arrangement of mortgage loans include, among others, the following criteria on:
- The relationship between the amount of the loan and the appraisal value of the property to be
mortgaged, as well as the existence of other supplementary collateral.
- The selection of the valuation entities.
- The relationship between the borrower’s debt and income, as well as verification of the information
provided by the borrowers and their solvency.
- Avoiding imbalances between the flows from the hedging portfolio and those deriving from honoring the
payments owed for the securities issued.
The Policies on issues related to the mortgage market are summarized below:
- The Bank's Finance Division annually defines the wholesale finance issue strategy, and more specifically
mortgage bond issues, such as covered bonds or mortgage securitization. The Assets and Liabilities
Committee (“ALCO”) tracks the budget monthly. The volume and type of assets in these transactions is
determined in accordance with the wholesale finance plan, the trend of the Bank's “Loans and
receivables” outstanding balances and market conditions. The Board of Directors authorizes each of the
mortgage-based securities or loan and credit securitizations based on the agreements to issue fixed-rate
debt securities approved at the General Meeting of Stockholders.
- The Bank has set up a series of controls for mortgage-based securities, which regularly control the total
volume of issued mortgage-based securities and the remaining eligible collateral. To avoid exceeding
the maximum limit on issuing mortgage-backed securities set by Royal Decree 716/2009, which is 80%
of the eligible collateral, the Bank has established an alert at 70%. In the case of securitizations, the
preliminary portfolio of loans and mortgage loans to be securitized is checked by the Bank’s external
auditor as required by the Spanish Securities and Exchange Commission. There are also a series of
filters through which some mortgage loans and credits are excluded in accordance with legal,
commercial and risk concentration criteria.
1.6. RESPONSIBILITY FOR THE INFORMATION AND FOR THE ESTIMATES MADE
The information presented in the Bank’s financial statements is the responsibility of the Bank's directors. In
preparing these financial statements estimates were occasionally made by the Bank in order to quantify
some of the assets, liabilities, income, expenses and commitments reported herein. These estimates relate
mainly to the following:
- Impairment losses on certain financial assets (see Notes 5, 6, 9, 10, 11, 12 and 15).
- The assumptions used to quantify other provisions (see Note 21) and for the actuarial calculation of
post-employment benefit liabilities and commitments (see Note 22).
- The average life and impairment losses on tangible and intangible assets and on non-current assets
held for sale and liabilities associated with non-current assets held for sale (see Notes 14, 16 and
17).
- The fair value of certain unlisted financial assets and liabilities (see Notes 5, 6, 8, 9, 10 and 13).
Although these estimates were made on the basis of the best information available as of December 31, 2010
on the events analyzed, events that take place in the future might make it necessary to change them
(upwards or downwards) in the coming years.
With regard to the impairment losses on financial assets and assets acquired in debt payments, of particular
importance is the coming into force on September 30, 2010, of Bank of Spain Circular 3/2010 of June 29.
This circular has modified Circular 4/2004 and introduced successive amendments with respect to hedging
of impairment losses to be carried out and to hedging of impairment losses on assets acquired in payment of
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