Balance Sheet at 31 December 2010 of BBVA

Liquidity risk.
Liquidity risk is the possibility that an entity may not be able to meet its payment commitment or that in
order to do so, it may have to raise funds under burdensome conditions, impairing its reputation and
public image. The Group centralises its liquidity risk monitoring in each bank, with two focal objectives:
The short-term focus covers up to 90 days. It mainly centres on managing the payments and
collections of Treasury and Markets, including proprietary trading in the area and the possible
liquidity requirements of the bank as a whole. The medium-term structural focus centres around
the financial management of the balance sheet, with a minimum one-yearly time horizon in its
monitoring. The evaluation of liquidity risk on assets is based on whether or not the assets are
eligible for re-discounting from the corresponding central bank. Under normal situations, maximum
liquidity assets, whether for the short or the mid-term focus, are considered to be assets that are on the
list of eligible assets published by the ECB or the corresponding monetary authority. Non-eligible
assets, listed or not for public trading, will only be considered a second line of liquidity for the Group
when analysing crisis scenarios. The integrated management of liquidity is carried out by the ALCO
through the Finance Department. It takes into account a wide range of limits, sub-limits and
alerts approved by the Executive committee. With these, the Risks area independently takes
measurements and exercises oversight. It also provides the tools manager with support and metrics for
decision making. Each of the local risks areas, all independent of the local manager, comply with
the corporate principles of liquidity risk control established by the Central Structural Market Risks
Unit (UCRAM) for the Group as a whole. At the level of each entity, the managing areas request
and propose a set of quantitative and qualitative limits and alerts that affect both short and mid-term
liquidity risk. Such requests must be authorised by the Executive committee. The Risks area also
performs daily and monthly measurements of risk incurred, develops valuation tools and models,
does periodic stress testing, measures the degree of concentration with inter-bank counterparties. It
draws up manuals on policies and procedures and monitors the authorised limits and alerts, reviewing
them at least once a year. The information on liquidity risks are periodically submitted to the Group's
ALCO and to the managing areas concerned. Under the Contingency Plan, the Technical Liquidity
Group (GTL) carries out the initial analysis of the Group's short and long-term liquidity situation
when there is any alert signal or sign of a possible crisis. The Technical Liquidity Group comprises
specialists from the short-term trading desk in Treasury, the Finance Department and UCRAM.
Structural risks. When such alerts might reflect a certain degree of gravity, the GTL reports to the
Liquidity committee, made up of the heads of the corresponding areas. The Liquidity committee is
tasked with calling the Crisis Committee in the event of extreme necessity.
OPERATIONAL RISK:
Operational risk is the risk of loss due to failures or mismatches of processes, staff and internal
systems or due to external events. Since 2000, the Group has had an operational risk model based on
identifying and quantifying all the risks individually. The model is based on the concept of anticipation.
This means it must be able to identify operational risks and their possible consequences before they
materialise in the form of events. BBVA has various tools implemented to cover the qualitative and
quantitative aspects of operational risk:
Ev-Ro: this is a tool for identifying and quantifying operational risk factors, ie, any circumstances that
cause or could cause losses. Their frequency and impact on the business and support areas is
estimate in terms of the direct cost, the indirect cost (inefficiency) and their opportunity cost
(manque à gagner). This tool is implemented throughout the Group and is updated each year. Ev-Ro
identifies priority operational risk factors, which represent 80% of the quantified risk. The Operational
Risk committees focus nearly all their attention on these factors.
TransVaR: to supplement Ev-Ro, the Group has an operational risk management tool using indicators.
An indicator is a variable associated to a process that measures its attributes, such as quality.
Consequently, it also serves to measure operational risk. This tool fundamentally serves to monitor
the risk performance and to establish alert signals. TransVar indicators are associated to the
causes of operational risk. They are predictive by nature. The most important indicators are volumes
processed, systems availability, the regularity of account reconciliation and the number of incidents in
WARNING: The English version is only a translation of the original in Spanish for information purposes. In case of a discrepancy,
the Spanish original prevails.