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

More documents

Recommendations

Info

7.2 MARKET RISK a) Market Risk Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, resulting in changes in the different assets and financial risk factors. The risk can be mitigated or even eliminated through hedges using other products (assets/liabilities or derivatives), or by undoing the transaction/open position. There are three main risk factories that affect market prices: interest rates, foreign exchange rates and equity. • Interest rate risk: defined as changes in the term structure of market interest rates for different currencies. • Foreign-exchange risk: this is the risk resulting from changes in the foreign exchange rate for different currencies. • 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. In addition, for certain positions, other risks also need to be considered: credit spread risk, basis risk, volatility or correlation risk. Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time horizon and given confidence level. VaR is calculated in the Group at a 99% confidence level and a 1-day time horizon. The BBVA and BBVA Bancomer have received approval from the Bank of Spain to use the internal model to calculate bank capital for market risk. In BBVA and BBVA Bancomer VaR is estimated using Historic Simulation methodology. This methodology consists of observing how the profits and losses of the current portfolio would perform if the market conditions from a particular historic period were in force, and from that information to infer the maximum loss at a certain confidence level. It offers the advantage of accurately reflecting the historical distribution of the market variables and of not requiring any specific distribution assumption. The historic period used is one of two years. With regard to market risk, limit structure determines a system of VaR and economic capital at risk limits for each business unit, with specific sub-limits by type of risk, activity and desk. Validity tests are performed on the risk measurement models used to estimate the maximum loss that could be incurred in the positions assessed with a certain level of probability (backtesting), as well as measurements of the impact of extreme market events on risk positions (stress testing). The Group is currently performing stress testing on historical and economic crisis scenarios drawn up by its Economic Research Department. Changes in market risk for the six months ended June 30, 2010 The BBVA Group’s market risk increased in 2010 compared to previous years. The average risk for the six months ended June 30, 2010 stood at €32.4 million (VaR calculation without smoothing). This growing risk of the Group can be explained primarily by the increase of the risk of Global Markets Europe and, to a lesser extent, by Global Markets Bancomer upon raising equity risk for greater exposure. The increase in Global Markets Europe is due to a great extent to the upturn in the volatility of market variables as a consequence of the situation in the second quarter in the debt markets in the southern Euro area countries. This situation has led to an increase in risk measurements, especially in the credit spread and interest rate risk. 58
During the period between June 30, 2009 and June 30, 2010, the changes in market risk (VaR calculations without smoothing with a 99% confidence level and a 1-day horizon) were as follows: MARKET RISK EVOLUTION (Millions of Euros) 45 40 35 30 25 20 15 10 5 0 Jun- 09 Jul- 09 Aug- 09 Sep- 09 Oct- 09 Nov- 09 VaR without smoothing GROUP Dec- 09 Jan- 10 Feb- 10 Mar- 10 Apr- 10 May- 10 Jun- 10 The breakdown of VaR by risk factor as of June 30, 2010 and December 31, 2009 was as follows: Millions of Euros VaR by Risk Factor June 2010 December 2009 Interest/Spread risk 44 38 Currency risk 9 2 Stock-market risk 6 9 Vega/Correlation risk 14 15 Diversification effect (35) (33) Total 39 31 VaR medium in the period 32 26 VaR max in the period 41 33 VaR min in the period 26 18 b) Structural interest rate risk The aim of on-balance-sheet interest rate risk management is to maintain the BBVA Group’s exposure to market interest rate fluctuations at levels in keeping with its risk strategy and profile. In pursuance of this, the Asset-Liability Committee (“ALCO”) undertakes active balance sheet management through operations intended to optimize the levels of risk borne according to the expected earnings and enables the maximum levels of accepted risk with which to be complied. ALCO uses the interest rate risk measurements performed by the Risk Area. Acting as an independent unit, the Risk Area periodically quantifies the impact of interest rate fluctuations on the BBVA Group’s net interest income and economic value. In addition to measuring the sensitivity to 100-basis-point changes in market interest rates, the Group performs probability calculations that determine the economic capital and risk margin for structural interest rate risk in the BBVA’s Group banking activity (excluding the Treasury area), based on interest rate curve simulation models. The Group regularly performs stress tests and sensitivity analysis to complement its assessment of its interest rate risk profile. All these risk measurements are subsequently analyzed and monitored, and levels of risk assumed and the degree of compliance with the limits authorized by the Executive Committee are reported to the various managing bodies of the BBVA Group. 59
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 12 and 13: Translation of consolidated financi
Page 14 and 15: Translation of consolidated financi
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 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 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
Page 102 and 103: Post-employments Benefits in Spain
Page 104 and 105: Post-Employment Actuarial Hypothesi
Page 106 and 107: during which to increase the common
Page 108 and 109: Reserves Assigned to the Consolidat
Page 110 and 111:
Millions of Euros Valuation Adjustm
Page 112 and 113:
on equity (ROE) by each business; a
Page 114 and 115:
39. INTEREST, INCOME AND SIMILAR EX
Page 116 and 117:
39.3. AVERAGE RETURN ON INVESTMENTS
Page 118 and 119:
41. SHARE OF PROFIT OR LOSS OF ENTI
Page 120 and 121:
45. OTHER OPERATING INCOME AND EXPE
Page 122 and 123:
linked to the movement of the Total
Page 124 and 125:
48. PROVISIONS (NET) The net allowa
Page 126 and 127:
The table below breaks down the mai
Page 128 and 129:
The amount disposed of the loans gr
Page 130 and 131:
BBVA executive team. It is to end o
Page 132 and 133:
Commission (CNMV) announced the lif
Page 134 and 135:
APPENDIX I. FINANCIAL STATEMENTS OF
Page 136 and 137:
Millions of Euros LIABILITIES AND E
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Millions of Euros (Continued) June
Page 144 and 145:
APPENDIX II. Additional information
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
APPENDIX III. Additional informatio
Page 154 and 155:
APPENDIX V. Changes and notificatio
Page 156 and 157:
APPENDIX VI. Fully consolidated sub
Page 158 and 159:
APPENDIX VIII. Breakdown of the mos
Page 160 and 161:
Outsanding as of June 30, 2010 of S
Page 162 and 163:
APPENDIX IX. Consolidated balance s
Page 164 and 165:
Diluted earnings per share Early re
Page 166 and 167:
Other financial assets/liabilities
Page 168 and 169:
BANCO BILBAO VIZCAYA ARGENTARIA, S.
Page 170 and 171:
The explanations of the changes in
Page 172 and 173:
4. SUMMARIZED INTERIM CONSOLIDATED
Page 174 and 175:
Spain and Portugal Millions of Euro
Page 176 and 177:
Mexico Millions of Euros Mexico Jun
Page 178 and 179:
South America Millions of Euros Sou
Page 180 and 181:
The United States Millions of Euros
Page 182 and 183:
Wholesale Banking and Asset Managem
Page 184 and 185:
The changes in the principal headin
Page 186 and 187:
Aggregating Tier I and Tier II, as
show all

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

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?