BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

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The breakdown of the consolidated net income for the six months ended June 30, 2010 and 2009 by business area was as follows: Millions of Euros Net Income attributed by Bussiness Areas June June 2010 2009 Spain and Portugal 1,186 1,212 Mexico 798 726 South America 453 421 The United States 144 138 WB&AM 532 477 Corporate Activities (586) (175) Subtotal 2,527 2,799 Non-assigned income - - Elimination of interim income (between segments) - - Other gains (losses) 183 243 Income tax and/or income from discontinued operations 941 961 INCOME BEFORE TAX 3,651 4,003 For the six months ended June 30, 2010 and 2009, the breakdown of the ordinary income for each business area, which is made up of the “Interest and similar income”, “Dividend income”, “Fee and commission income”, “Net gains (losses) on financial assets and liabilities” and “Other operating income”, is as follows: Millions of Euros Total Ordinary Income by Bussiness Areas June June 2010 2009 Spain and Portugal 5,056 5,688 Mexico 4,108 4,055 South America 1,583 1,672 The United States 2,732 2,934 WB&AM 1,102 1,822 Corporate Activities 1,649 1,827 Adjustments and eliminations of ordinary income between segments - - Total 16,230 17,998 7. RISK EXPOSURE Dealing in financial instruments can entail the assumption or transfer of one or more classes of risk by financial institutions. The risks related to financial instruments are: • Credit risk: credit risk defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. • Market risks: these are defined as the risks arising from the maintenance of financial instruments whose value may be affected by changes in market conditions. It includes three types of risk: - Foreign-exchange risk: this is the risk resulting from variations in foreign exchange rates. - Interest rate risk: this arises from variations in market interest rates. - Price risk: this is the risk resulting from variations in market prices, either due to factors specific to the instrument itself, or alternatively to factors which affect all the instruments traded on the market. • Liquidity risk: this is the possibility that a company cannot meet its payment commitments duly, or, to do so, must resort to borrowing funds under onerous conditions, or risking its image and the reputation of the entity. 46
- PRINCIPLES <strong>AND</strong> POLICIES The general guiding principles followed by the <strong>BBVA</strong> Group to define and monitor its risk profile are set out below: • The risk management function is unique, independent and global. • The assumed risks must be compatible with the target capital adequacy and must be identified, measured and assessed. Monitoring and management procedures and sound control and mitigation systems must likewise be in place. • All risks must be managed integrally during their life cycle, being treated differently depending on their type and with active portfolio management based on a common measurement (economic capital). • It is each business area’s responsibility to propose and maintain its own risk profile, within their independence in the corporate action framework (defined as the set of risk policies and procedures), using a proper risk infrastructure. • The risk infrastructure must be suitable in terms of people, tools, databases, information systems and procedures so that there is a clear definition of roles and responsibilities, ensuring efficient assignment of resources among the corporate area and the risk units in business areas. Building on these principles, the Group has developed an integrated risk management system that is structured around three main components: a corporate risk governance regime, with adequate segregation of duties and responsibilities a set of tools, circuits and procedures that constitute the various different risk management regimes, and an internal risk control system. - CORPORATE GOVERNANCE SYSTEM The Group has a corporate governance system which is in keeping with international recommendations and trends, adapted to requirements set by regulators in each country and to the most advanced practices in the markets in which it pursues its business. In the field of risk management, it is the board of directors that is responsible for approving the risk control and management policy, as well as periodically monitoring internal reporting and control systems. To perform this function correctly the board is supported by the Executive Committee and a Risk Committee, the main mission of the latter being to assist the board in undertaking its functions associated with risk control and management. Under Article 36 of the Board Regulations, the Risk Committee is assigned the following functions for these purposes: • To analyze and evaluate proposals related to the Group’s risk management and oversight policies and strategies. • To monitor the match between risks accepted and the profile established. • To assess and approve, where applicable, any risks whose size could compromise the Group’s capital adequacy or recurrent earnings, or that present significant potential operational or reputational risks. • To check that the Group possesses the means, systems, structures and resources in accordance with best practices to allow the implementation of its risk management strategy. The risk management function is distributed into the Risk Units of the business areas and the Corporate Area, which defines the policy, strategies, methodologies and global infrastructure. The Risk Units in the business areas propose and maintain the risk profile of each client independently, but within the corporate framework for action. The Corporate Risk Area combines the view by risk type with a global view. It is made up of the Corporate Risk Management unit, which covers the different types of risk, the Technical Secretary responsible for technical comparison, which works alongside the transversal units: such as Structural 47
Page 1: BANCO BILBAO VIZCAYA ARGENTARIA, S.
Page 4 and 5: 27. COMMON STOCK...................
Page 6 and 7: Translation of consolidated financi
Page 8 and 9: Millions of Euros LIABILITIES AND E
Page 10 and 11: Millions of Euros June June Notes 2
Page 16 and 17: BANCO BILBAO VIZCAYA ARGENTARIA, S.
Page 18 and 19: The BBVA Group ICFR Model is summar
Page 20 and 21: 2.2. ACCOUNTING POLICIES AND VALUAT
Page 22 and 23: - Other financial instruments The f
Page 24 and 25: In the case of unsecured transactio
Page 26 and 27: 2.2.2. TRANSFERS AND DERECOGNITION
Page 28 and 29: The fair value of non-current asset
Page 30 and 31: 2.2.7. BUSINESS COMBINATIONS The re
Page 32 and 33: insurees, as the case may be, based
Page 34 and 35: • The discount rate used is deter
Page 36 and 37: 2.2.16. FOREIGN CURRENCY TRANSACTIO
Page 38 and 39: 2.2.22. CONSOLIDATED STATEMENTS OF
Page 40 and 41: IFRIC 17 - Distributions of non-cas
Page 42 and 43: The Group’s activity is mainly lo
Page 44 and 45: Changes in the Group The most signi
Page 46 and 47: - In the denominator, the average n
Page 50 and 51: Management & Asset Allocation, Risk
Page 52 and 53: Maximum exposure to credit risk The
Page 54 and 55: debtors includes mortgages, cash gu
Page 56 and 57: Policies and procedures for prevent
Page 58 and 59: December 2009 Less than 6 Months Pa
Page 60 and 61: 7.2 MARKET RISK a) Market Risk Mark
Page 62 and 63: Below are the average interest rate
Page 64 and 65: 7.4. RISK CONCENTRATIONS Below is p
Page 66 and 67: Determining the fair value of finan
Page 68 and 69: Financial Instruments LEVEL 2 Valua
Page 70 and 71: The changes in the six months ended
Page 72 and 73: 10.2. DEBT SECURITIES The breakdown
Page 74 and 75: 11. OTHER FINANCIAL ASSETS DESIGNAT
Page 76 and 77: 12.3. EQUITY INSTRUMENTS The breakd
Page 78 and 79: 13.2. LOANS AND ADVANCES TO CREDIT
Page 80 and 81: Millions of Euros December 2009 Amo
Page 82 and 83: December 2009 Currency Risk Interes
Page 84 and 85: 17.1. ASSOCIATES The following tabl
Page 86 and 87: 17.3. INFORMATION ABOUT ASSOCIATES
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Page 90 and 91: 21.3 RECONCILIATION The reconciliat
Page 92 and 93: 23. FINANCIAL LIABILITIES AT AMORTI
Page 94 and 95: Millions of Euros December 2009 Dem
Page 96 and 97: The item “Subordinated Liabilitie
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The breakdown of the commitments pe
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June 30, 2010 and December 31, 2009
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Post-employments Benefits in Spain
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Post-Employment Actuarial Hypothesi
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during which to increase the common
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Reserves Assigned to the Consolidat
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Millions of Euros Valuation Adjustm
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on equity (ROE) by each business; a
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39. INTEREST, INCOME AND SIMILAR EX
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39.3. AVERAGE RETURN ON INVESTMENTS
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41. SHARE OF PROFIT OR LOSS OF ENTI
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45. OTHER OPERATING INCOME AND EXPE
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linked to the movement of the Total
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48. PROVISIONS (NET) The net allowa
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The table below breaks down the mai
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The amount disposed of the loans gr
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BBVA executive team. It is to end o
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Commission (CNMV) announced the lif
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APPENDIX I. FINANCIAL STATEMENTS OF
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Millions of Euros LIABILITIES AND E
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Millions of Euros (Continued) June
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APPENDIX II. Additional information
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APPENDIX III. Additional informatio
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APPENDIX V. Changes and notificatio
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APPENDIX VI. Fully consolidated sub
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APPENDIX VIII. Breakdown of the mos
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Outsanding as of June 30, 2010 of S
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APPENDIX IX. Consolidated balance s
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Diluted earnings per share Early re
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Other financial assets/liabilities
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BANCO BILBAO VIZCAYA ARGENTARIA, S.
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The explanations of the changes in
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4. SUMMARIZED INTERIM CONSOLIDATED
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Spain and Portugal Millions of Euro
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Mexico Millions of Euros Mexico Jun
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South America Millions of Euros Sou
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The United States Millions of Euros
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Wholesale Banking and Asset Managem
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The changes in the principal headin
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Aggregating Tier I and Tier II, as
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