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.
Internal Control and Operational Risk Models, and likewise to monitor and locate the main
operational risks the Group is subject to, including those that are transversal in nature. This
Committee is therefore the highest operational risk management body in the Group.
• This Risk Management Committee is made up of the risk managers from the Risk Units from the
business areas and those of the Corporate Risk Area. This body meets monthly and is responsible
for establishing the Group's risk strategy (especially as regards policies and structure of the
operation of the Group), presenting the risk strategy to the Group’s governing bodies for their
approval, monitoring the management and control of risks in the Group and, if necessary, adopting
the necessary actions.
• The Global Risk Management Committee is made up of the corporate directors of the Group's risk
unit and those responsible for risks in the different countries. The Committee meets every week to
review the Group's risk strategy, and review and agree on the main risk projects and initiatives in the
business areas.
• The Assets and Liabilities Committee (“ALCO”) is responsible for actively managing structural
interest rate and foreign exchange risk positions, global liquidity and the Group’s capital resources.
• The Technology and Methodologies Committee is a forum that decides on the hedging needs of models and infrastructures in
the Business Areas within the framework of the operational model of GRM.
• The functions of the New Products Committee are to assess, and if appropriate to approve, the
introduction of new products before the start of activity; to undertake subsequent control and
monitoring for newly authorized products; and to foster business in an orderly way to enable it to
develop in a controlled environment.
TOOLS, CIRCUITS AND PROCEDURES
The Bank has implemented an integral risk management system designed to cater for the needs arising in
relation to the various types of risk. This has prompted it to equip the management processes for each risk
with measurement tools for risk acceptance, assessment and monitoring and to define the appropriate
circuits and procedures, which are reflected in manuals that also include management criteria.
Specifically, the main risk management activities performed are as follows: calculation of the risk exposures
of the various portfolios, considering any related mitigating factors (netting, collateral, etc.); calculation of the
probability of default ( “PD”), loss severity and expected loss of each portfolio, and assignment of the PD to
the new transactions (ratings and scorings); values-at-risk measurement of the portfolios based on various
scenarios using historical simulations; establishment of limits to the potential losses based on the various
risks incurred; determination of the possible impacts of the structural risks on the income statement; setting
of limits and alerts to safeguard the Bank’s liquidity; identification and quantification of operational risks by
business line to enable the mitigation of these risks through corrective measures; and definition of efficient
circuits and procedures which contribute to the efficient achievement of the targets set.
INTERNAL CONTROL MODEL
The Group’s Internal Control Model is based on the best practices described in the following documents:
“Enterprise Risk Management – Integrated Framework” by the COSO (Committee of Sponsoring
Organizations of the Treadway Commission) and “Framework for Internal Control Systems in Banking
Organizations” by the Bank for International Settlements (BIS).
The Internal Control Model therefore comes within the Integral Risk Management Framework. Said
framework is understood as the process within an organization involving its board of directors, its
management and all its staff, which is designed to identify potential risks facing the institution and which
enables them to be managed within the limits defined, in such a way as to reasonably assure that the
organization meets its business targets.
This Integral Risk Management Framework is made up of Specialized Units (Risks, Compliance, Accounting
and Consolidation, Legal Services), the Internal Control Function, Operational Risk and Internal Audit.
The Internal Control Model is underpinned by, amongst others, the following principles:
• The “process” is the articulating axis of the Internal Control Model.
• Risk identification, assessment and mitigation activities must be unique for each process.
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