BBVA in 2012

The so-called bureau scoring models, widely used in the Americas, are also of great importance. Thiskind of tool is similar to the scorings explained above, except that while the latter are based on theBank’s internal information, bureau scoring requires credit information from other credit institutionsor banks (on default events or customer behavior). In countries with positive bureau information,existing external and internal information is combined. This information is provided by specializedagencies that compile data from other entities. Not all banks collaborate in supplying this information,and usually only participating entities have access to it. In Spain, the Bank of Spain’s Risk InformationCenter (CIRBE) makes such information available. Bureau scorings are used for the same purpose asthe other scorings: i.e. authorizing transactions, setting risk limits and monitoring risk.An adequate management of the reactive, behavioral, proactive and bureau tools by the Groupmeans that updated risk parameters can be obtained and are adapted to economic reality. Thisresults in precise knowledge of the credit health of transactions and/or customers. This taskis particularly relevant in the current economic situation, as it makes it possible to identify thecontracts or customers that are in difficulties, and thus take the necessary measures to managerisks that have already been assumed.RatingThese tools focus on wholesale customers: companies, corporations, SMEs, the public sector, etc. Insuch cases, default events are predicted at the customer level rather than at the contract level.The risk assumed by BBVA in the wholesale customer portfolio is classified in a standardizedway by using a single master scale in economic terms for the whole Group that is available intwo versions: a reduced one with 22 degrees and an extended one with 34. The master scaleallows discrimination amongst credit quality levels, taking into account geographical diversity andthe different types of risk in the different wholesale portfolios in the countries where the Groupoperates.The information provided by the rating tools is used when deciding on accepting transactions andreviewing limits.Some of the wholesale portfolios managed by BBVA are low default portfolios, in which thenumber of default events is low (sovereign risks, corporations, etc.). To obtain PD estimates in theseportfolios, the internal information is supplemented by external data, mainly from external ratingagencies and the databases of external suppliers.There are different axes that permit the risk of different customers to be assessed. Chart 9 is anexample of a rating tool calibration curve for BBVA Spain companies based on the internal scoringassigned and the sector groups, which show a different cyclicality.9Rating tool calibration for BBVA Spain companies(Default rates based on score and sector groups, with different cyclicality)30%25%CyclicalindustryVery cyclicalindustryDefault rates20%15%10%5%0%– +Score96 Risk management