Balance Sheet at 31 December 2010 of BBVA

Risk materialised in the financial year
See following sections
Circumstances that led to this
Risk is inherent to financial activities and therefore the materialisation of risk, to a greater or lesser
degree, is absolutely unavoidable.
Operation of the control systems
The Group has sophisticated systems and tools for measuring and controlling risk of whatever kind. Its
aim is to limit the maximum impact that risks could trigger were they to materialise. The control
systems have worked satisfactorily during 2010. Below, we detail the most relevant parameters of risk
management in 2010 for the BBVA Group.
CREDIT RISK
Mitigation of credit risk, collaterals and other credit enhancements, including hedging
and risk mitigation policies.
Maximum exposure to credit risk, in most cases, is reduced by collateral, credit
enhancement and other actions that mitigate the Group's exposure.
The Group's policy for covering and mitigating credit risk derives from its business model in banking.
It is, above all, a relationship-oriented bank. On the basis of this relational banking model, the
constitution of security is a necessary instrument, but not sufficient when granting risks. Thus, for the
Group to bear a risk, it must first verify the payment capacity or the capacity to generate funding to
meet the repayment schedule on the risk taken.
The procedures used to value collateral security reflect best practices in the market. This means
using appraisals for real-estate collateral, market pricing for exchange-traded securities, listed
prices for holdings in mutual funds, etc.
All collateral must be correctly instrumented an duly registered. It must also be approved by the
Group's Legal Affairs units.
The following is a description of the main collateral received for each category of financial
instruments:
Trading portfolio: The collateral or credit enhancement obtained directly from the issuer or
counterparty are implicit in the clauses of the instrument. In trading derivatives the credit risk is
minimised by contractual clearing agreements, in which derivative assets and liabilities with the same
counterparty are netted out for settlement. There may also be other kinds of security, depending on
the solvency of the counterparty and the nature of the transaction.
Other financial assets at fair value with changes in profits and losses: The collateral or credit
enhancement obtained directly from the issuer or counterparty are inherent in the structure of the
instrument.
Financial assets available for sale: The collateral or credit enhancement obtained directly from the
issuer or counterparty are inherent in the structure of the instrument.
Credit investments:
- Deposits in financial institutions: These have the personal guarantee of the counterparty and, in some
cases, additional guarantees from another financial institution which a credit derivative has been
established.
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.