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

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Maximum exposure to credit risk The Group’s maximum credit exposure as of June 30, 2010 and December 31, 2009 (without including valuation adjustments nor recognizing the availability of collateral or other credit enhancements to guarantee compliance) is broken down by financial instrument and counterparties in the table below: Millions of Euros Maximum Credit Risk Exposure Notes June December 2010 2009 Financial assets held for trading 10 24,863 34,672 Debt securities 24,863 34,672 Government 20,406 31,290 Credit institutions 2,766 1,384 Other sectors 1,691 1,998 Other financial assets designated at fair value through profit or loss 11 728 639 Debt securities 728 639 Government 70 60 Credit institutions 86 83 Other sectors 572 496 Available-for-sale financial assets 12 54,772 57,067 Debt securities 54,772 57,067 Government 36,000 38,345 Credit institutions 12,125 12,646 Other sectors 6,647 6,076 Loans and receivables 370,196 353,741 Loans and advances to credit institutions 13.2 21,838 22,200 Loans and advances to customers 13.3 347,673 331,087 Government 30,178 26,219 Agriculture 3,736 3,924 Industry 45,227 42,799 Real estate and construction 55,308 55,766 Trade and finance 41,017 40,714 Loans to individuals 136,825 126,488 Leases 7,969 8,222 Other 27,413 26,955 Debt securities 685 454 Government 553 342 Credit institutions 4 4 Other sectors 128 108 Held-to-maturity investments 14 9,768 5,438 Government 8,541 4,064 Credit institutions 627 754 Other sectors 600 620 Derivatives (trading and hedging) 15 54,157 42,836 Subtotal 514,484 494,393 Valuation adjustments 303 436 Total balance 514,787 494,829 Financial guarantees 36,159 33,185 Drawable by third parties 91,711 84,925 Government 4,292 4,567 Credit institutions 2,121 2,257 Other sectors 85,298 78,101 Other contingent exposures 6,297 7,398 Total off-balance 34 134,167 125,508 Total maximum credit exposure 648,954 620,338 For financial assets recognized in the accompanying consolidated balance sheets, credit risk exposure is equal to the carrying amount, except for trading and hedging derivatives. The maximum exposure to credit risk on financial guarantees is the maximum that <strong>BBVA</strong> would be liable for if these guarantees were called in. 50
For trading and hedging derivatives, this information reflects the maximum credit exposure better than the amount shown on the balance sheet because it does not only include the market value on the date of the transactions (the carrying amount only shows this figure); it also estimates the potential risk of these transactions on their due date. Regarding the renegotiated financial assets as of June 30, 2010, the <strong>BBVA</strong> Group did not perform any renegotiations that resulted in the need to reclassify doubtful risks as outstanding risks. The amount of financial assets that would be irregular had their conditions not been renegotiated is not significant with respect to the Group's total loan portfolio as of June 30, 2010. Mitigation of credit risk, collateral and other credit enhancements, including risk hedging and mitigation policies In most cases, maximum exposure to credit risk is reduced by collateral, credit enhancements and other actions which mitigate the Group’s exposure. The Group applies a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship banking. On this basis, the provision of guarantees is a necessary but not sufficient instrument when taking risks; therefore for the Group to assume risks, it needs to verify the payment or resource generation capacity to ensure the amortization of the risk incurred. The above is carried out through a prudent risk management policy which consists of analyzing the financial risk in a transaction, based on the repayment or resource generation capacity of the credit recipient, the provision of guarantees in any of the generally accepted ways (cash collateral, pledged assets, personal guarantees, covenants or hedges) appropriate to the risk undertaken, and lastly on the recovery risk (the asset’s liquidity). The procedures for the management and valuation of collaterals are set out in the internal Manual on Credit Risk Management Policies, which the Group actively uses in the arrangement of transactions and in the monitoring of both these and customers. This Manual lays down the basic principles of credit risk management, which includes the management of the collateral assigned in transactions with customers. Accordingly, the risk management model jointly values the existence of an adequate cash flow generation by the obligor that enables him to service the debt, together with the existence of suitable and sufficient guarantees that ensure the recovery of the credit when the obligor’s circumstances render him unable to meet their obligations. The procedures used for the valuation of the collateral are consistent with the market's best practices, which involve the use of appraisal for real estate guarantees, market price for shares, quoted value of shares in a mutual fund, etc. All collaterals assigned are to be properly instrumented and recognized in the corresponding register, as well as receive the approval of the Group’s Legal Units. The following is a description of the main collateral for each financial instrument class: • Financial assets held for trading: The guarantees or credit enhancements obtained directly from the issuer or counterparty are implicit in the clauses of the instrument. In trading derivatives, credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction. • Other financial assets designated at fair value through profit or loss: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. • Available for sale financial assets: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. • Loans and receivables: - Loans and advances to credit institutions: These have the counterparty’s personal guarantee. - Total lending to customers: Most of these operations are backed by personal guarantees extended by the counterparty. The collateral received to secure loans and advances to other 51
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 48 and 49: The breakdown of the consolidated n
Page 50 and 51: Management & Asset Allocation, Risk
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
Page 88 and 89: The main activity of the Group is c
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
Page 98 and 99: The breakdown of the commitments pe
Page 100 and 101: 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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BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

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