BBVA in 2012

LGD estimates are carried out by segmenting operations according to different factors that arerelevant for its calculation, such as the default period, seasoning, the loan to value ratio, type ofcustomer, score, etc. The factors considered may be different according to the portfolio beinganalyzed. Some of these are illustrated below with examples.• For contracts already in default, an important factor is the time elapsed since the default.The longer the contract has been in default, the lower the recovery of the outstandingdebt. For the purposes of calculating the expected loss and economic capital, thecontracts that are not in default are also assigned a LGD comparable to contracts thathave just defaulted (Chart 11).11LGD of BBVA credit cards in Spain (for domestic customers and by time in default)100%90%80%LGD rates70%60%50%40%30%1 2 3 4 5 6 7 8 9 12 15 18 21 24 30 36 42 48 60 72 84Months in default• The seasoning of a transaction is the period elapsed from the origination of the contractto the default date. This is also relevant, as there is an inverse relationship between LGDand seasoning: the longer the contract persists without defaulting, the greater its recovery(Chart 12).12LGD curves by seasoning for various products in Spain60%50%CreditcardsFinanziaauto financeMortgagesLGD rates40%30%20%10%0%Up to 1 year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years From 5 to 6 years More than 6 yearsSeasoningThere are portfolios in which LGD changes when combining the aforementioned axes:• Nationality and seasoning. In recent years, nationality has been a relevant factor in LGD inBBVA Spain retail portfolios (Chart 13).98 Risk management